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MODERN    ACCOUNTANT 


REVISED 


J.   A.   LYONS 

AND 

WALTER  L.  READ 


J.  A.  LYONS  &  COMPANY 

CHICAGO  NEW  YORK 


'  ^' 


Copyrighted,  1911,  by 

J.  A.  LYONS  &  COMPANY 
EDUCATlOiMi  oeir*» 


PREFACE   TO   THE   REVISED    EDITION 


This  edition  is  a  complete  revision  of  the  old  Modern  Accountant.  It  is  not  a  revision 
in  the  common  acceptation  of  the  word,  for  the  text  has  been  entirely  rewritten.  The 
material  used  for  the  transactions  is  entirely  new  and  has  been  brought  up  to  date.  But 
the  method  of  presentation  and  the  general  plan  of  development,  which  users  of  the  old 
edition  have  found  so  effective,  have  been  retained. 

Account  study  and  journaHzing  are  developed  together  from  the  start.  Journalizing 
is  made  clear  by  an  understanding  of  accounts,  and  the  inter-relation  of  accounts  is  more 
readily  appreciated  when  journalizing  is  understood.  The  point  of  attack  is  the  account, 
but  the  early  introduction  of  the  journal  brings  the  student  quickly  to  the  trial  balance. 
The  sales  book  and  cash  book  are  introduced  simultaneously,  at  an  early  stage.  The 
natural  result  of  this  plan  of  presentation  is  to  greatly  shorten  the  preliminary  period 
during  which  it  will  be  conceded  that  the  student  gets  no  comprehensive  view  of  book- 
keeping. The  purchase  book  and  the  six-column  cash  book  are  introduced  simultaneously, 
at  a  later  stage. 

Bookkeeping  is  a  problem  that  is  subdivided  into  many  smaller  problems.  These 
problems  are  stated  in  the  form  of  accounts.  The  facts  from  which  the  problems  are 
formulated  are  the  transactions  of  business. 

The  problems  of  bookkeeping  are  simple  in  themselves.  Arithmetically  they  present 
no  difficulties  to  the  student  of  ordinary  intelligence.  If  bookkeeping  heretofore  has 
been  considered  mysterious  and  difficult,  it  has  been  because  the  student  has  not  been 
taught  to  see  the  simple  underlying  problem  in  each  account,  but  has  been  confused  by 
the  form,  and  by  the  necessity  for  learning  rules  which  he  cannot  understand. 

The  method  of  presentation  in  Modern  Accountant  is  inductive.  Each  account  is 
first  presented  as  a  simple  problem,  no  technical  language  being  used  and  no  rule  being 
given.  The  solution  of  this  problem  is  easy  and  the  student  discovers  the  rule  for  him- 
self, the  text  carefully  guiding  him  toward  a  correct  solution.  The  problem  itself  being 
understood  by  the  student,  he  has  no  difficulty  in  learning  the  rule,  which  is  then  stated 
in  a  formal  way. 

Some  of  the  forms  and  minor  bookkeeping  details  have  been  changed  slightly,  in  the 
revised  edition,  to  conform  to  changing  usage.  Unnecessary  ruling  between  entries  in 
the  journal  and  sales  book  is  omitted,  as  well  as  unnecessary  closing  of  personal  accounts 
in  the  ledger.  Trial  balances  are  taken  by  differences.  Provision  is  made  for  the  use 
of  the  two-page  statement  forms  instead  of  the  one-page  forms,  if  desired.  Closing  the 
ledger  through  journal  entries,  though  not  advised,  is  illustrated,  and  this  method  of 
closing  can  be  used,  if  desired,  in  the  last  set. 

The  work  of  Modern  Accountant  is  elementary.  It  brings  the  student  up  to  the  point 
where  he  is  ready  for  Wholesale  Accounting,  the  second  part  of  the  Lyons  Accounting  Series. 
It  is  believed  that  it  lays  a  thorough  foundation  for  this  and  the  more  advanced  texts 
which  follow  in  the  series. 

3 


54IH41 


PRELIMINARY  PROBLEMS 

To  THE  Student:  Bookkeeping  is  not  a  difficult  and  mysterious  subject.  It  consists  of  simple 
arithmetical  problems  that  any  person  of  average  intelligence  and  a  common  school  education  can  solve 
without  any  knowledge  of  bookkeeping  forms.  It  teaches  you  how  to  record  the  facts  from  which  those 
problems  are  constructed  in  proper  form  and  how  to  record  the  results  in  proper  form.  In  short,  it  requires 
of  you  nothing  that  you  do  not  already  know  except  that  records  shall  be  made  in  certain  customary 
forms,  and  those  forms  are  taught  as  your  work  progresses.  To  show  you  that  bookkeeping  is  very  simple 
mathematically,  we  give  herewith  fourteen  problems  which  present  all  there  is  to  the  mathematical  side 
of  Chapters  I  and  II. 

Problem  1.  During  January,  A  took  in  $873.50  in  cash.  During  the  same  month  he  paid  out 
$542.65  in  cash.     How  much  cash  had  he  left? 

PnoBLEM  2.  B's  cash  receipts  for  February  were  as  follows:  .$42.56,  $53.75,  $61.38,  $82.43,  $194.79. 
He  paid  out  in  cash  during  February:    $23.62,  $35.00,  $10.50.     How  much  cash  had  he  left? 

Problem  3.  C  received  $100.00  in  cash  on  Mar.  1;  On  Mar.  2  he  paid  out  $10.60  in  cash;  on  Mar. 
4  he  received  ca-sh,  $22.89;  on  Mar.  7  he  paid  out  cash,  $5.75;  on  Mar.  8  he  paid  out  cash  $4.00;  on  Mar. 
15  he  received  $27.50  in  cash;  on  Mar.  16  he  received  $10.00  in  cash;  on  Mar.  20  he  paid  out  cash,  $8.76. 
How  much  cash  had  he  left? 

Problem  4.  D  bought  a  house  for  $4000.00  and  sold  it  for  $4650.00.  Did  he  gain  or  lose,  and 
how  much? 

Problem  5.  During  April,  E  purchased  goods  as  follows:  $150.00,  $262..50,  $137.85.  His  sales 
for  April  were  $60.00,  ,$95.00,  $123.46,  $27.85,  $75.60,  $28.95,  $82.93,  $95.67,  $60.24.  He  had  no  goods 
remaining  after  the  last  sale.     Did  he  gain  or  lose  in  his  dealings  in  the  goods,  and  how  much? 

Problem  6.  F  bought  goods  during  May  amounting  to  S7500.00.  His  sales  for  May  amounted 
to  $3000.00  and  on  May  31  he  had  goods  wortli  $5600.00  remaining  on  hand.  Did  he  gain  or  lose  in  his 
dealings  in  goods  during  May,  and  how  much? 

Problem  7.  On  June  1,  Mr.  G  had  goods  worth  $2000.00.  During  June  he  bought  goods  costing 
him  $1,500.00.  His  sales  for  June  were  $1800.00  and  on  June  30  he  had  goods  remaining  on  hand  worth 
$2100.00.     Did  he  gain  or  lose  in  liis  dealings  in  the  goods  during  June,  and  how  much? 

Problem  8.  Mr.  H,  starting  with  $1000.00  in  cash  on  July  1,  bought  goods  for  cash  on  July  2  cost- 
ing him  $250.00.  On  July  3  he  sold  goods  for  $100.00,  receiving  cash  in  exchange.  On  July  6,  he  bought 
goods  for  cash,  .$425.00.  On  July  8,  he  sold  goods  for  cash,  $1.50.00.  On  July  10,  he  sold  goods  for  cash, 
$223.60.  On  July  31,  he  .sold  all  goods  remaining  on  hand  for  cash,  $351.40.  What  was  his  profit  on 
goods  for  July?     How  much  cash  did  he  have  on  hand  July  31? 

Problem  9.  On  Aug.  2,  J  bought  from  me  on  credit  goods  worth  $100.00.  On  Aug.  3  he  paid 
me  $12.50.  On  Aug.  6  he  bought  from  me  on  credit  goods  worth  $56.00.  Later  he  made  me  the  follow- 
ing payments:    $26.70,  $35.00,  $5.00.     How  much  did  he  .still  owe  me? 

Problem  10.  Your  emplover  bought  goods  from  H  &  Co.  amounting  to  $150.00  on  Sept.  5.  On 
Sept.  15  he  paid  H  &  Co.  $100.00.  Later  he  bought  from  H  &  Co.  bills  of  goods  as  follows:  $225.00, 
$260.00,  $123.40,  and  made  the  following  payments:  $200.00,  $300.00,  $50.00,  $25.00.  How  much  did 
your  employer  still  owe  H  &  Co.? 

Problem  11.  On  Oct.  4,  I  received  K's  note  for  $100.00.  On  Oct.  6,  I  received  L's  note  for  $57.50. 
On  Oct.  24,  K  paid  for  his  note  and  I  gave  it  back  to  him.  On  Oct.  25,  I  received  M's  note  for  $125.00. 
On  Oct.  26,  L  paid  me  $25.00  on  his  note.     Now  much  was  still  due  me  on  other  persons'  notes? 

Problem  12.  N  paid  $2.67  for  interest  on  Nov.  2.  On  Nov.  3,  he  received  $3. .50  from  R  for  interest. 
Other  receipts  for  interest:  $5.63,  $2.34,  $1.85.  Other  payments  for  mterest,  $2.34,  $3.78,  $12.50.  Did 
N  lose  or  gain  on  interest,  and  how  much? 

Problem  13.  S  invest<>d  $5000.00  in  business  on  Dec.  1.  On  the  tenth  of  the  month,  he  added 
$1000.00  to  his  investment.  On  Dec.  15,  he  withtlrew  $25.00.  Other  withdrawals:  $10.00,  $5.00,  $20.00. 
His  gain  for  the  month  was  $540.00,  which  he  added  to  his  investment.  What  was  the  business  worth 
on  Dec.  31? 

Problem  14.  T  paid  $50.00  for  January  rent  on  Jan.  1.  On  Jan.  3  he  paid  $10.00  for  postage 
stamps.  Other  expenses  during  January  were:  $12.60,  $1..50,  $2.75,  $18.00,  $5  00.  On  Jan.  20,  he  .sold 
to  W  $4.00  worth  of  postage  stamps.  AMiat  was  the  total  of  T's  expenses  for  January?  How  much  did 
his  expenses  cost  him,  allowing  for  returns  from  the  sale  of  stamps  on  Jan.  20? 

The  student  may  be  assured  that  he  will  i?ncounter  nothing  more  difficult  in  principle  than  the  fore- 
going fourteen  problems,  throughout  the  first  two  chapters.  Problems  will  be  longer,  but  will  not  be 
difficult  of  comprehension. 

Do  not  look  for  something  hard.  As  you  have  seen,  the  mathematical  side  of  bookkeeping  is  easy. 
All  you  must  do  is  to  learn  the  proper  forms,  and  the  work  will  not  be  difficult  for  you  at  any  point  unless 
you' allow  the  forms  to  confuse  you  and  thus  lose  sight  of  the  simple  problem  presented  by  each  account. 

4 


MODERN  ACCOUNTANT 


REVISED 
CHAPTER  I 

ACCOUNTS 


Lesson  I.     The  Cash  Account 

Cash,  as  the  word  is  used  in  bookkeeping,  is  money  or  tlie  equivalent  of  money. 

In  its  narrow  sense,  cash  includes  only  currency  and  coin,  but  in  practice  checks  and  other  orders 
for  money  payable  instantly  upon  demand  at  banks,  postofEces,  and  express  offices  are  treated  as  cash 

Suppose  that  I  have  received  and  paid  out  cash  as  shown  in  the  Illustrative  Exercise 
below.  As  each  receipt  and  payment  has  occurred,  I  have  made  a  record  of  it,  as  shown 
in  the  Illustration.  Trace  each  receipt  and  each  payment  from  the  Illustrative  Exercise 
to  the  Illustration. 


7.  Paid  out  cash,  $142.30 

10.  Received  cash,  $  76.20 

11.  Paid  out  cash,  $  26.10 
16.  Paid  out  cash,  $  65.00 


ILLUSTRATIVE 

EXERCISE 

191— 

Sept.     1. 

Received  cash. 

$160.00            Sep1 

2. 

Paid  out  cash, 

«  80.45 

4. 

Paid  out  cash, 

$  25.43 

5. 

Received  cash, 

$  40.60 

6. 

Received  cash, 

1128.30 

ILLUSTRATION 

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Explanation.     The  above  form  is  called  an  account. 

5 


ACCOUNTS 


QTTESTIOirS 

Items  of  what  kind  are  entered  upon  the  left  side  of  the  cash  account? 

Items  of  what  Icind  are  entered  upon  tlie  right  side  of  tlie  cash  account? 

How  can  you  tell  how  much  cash  you  received  from  Sept.  1  to  Sept.  16  inclusive? 

How  can  you  tell  how  much  ca.sh  you  paid  out  from  Sept.  1  to  Sept.  16  inclusive? 

How  can  you  tell  how  inuch  cash  you  should  have  on  hand  on  Sept.  16? 

How  much  should  you  have  on  hand  on  Sept.  16? 

Which  side  cannot  be  the  greater?     Why? 

WTiat  would  be  the  condition  if  the  sides  were  the  same? 

How  can  you  determine  whether  the  cash  account  is  correct? 

The  facts  as  to  cash  receipts  and  cash  payments  having  been  stated  in  the  form  of 
an  account,  my  problem  as  bookkeeper  on  Sept.  16  was  to  find  out  how  much  cash  should 
have  been  on  hand.  I  did  this  and  then  prepared  the  account  to  show  the  result  secured. 
This  is  illustrated  below.  Study  the  form  and  its  explanation  carefully  and  answer  the 
questions  following. 


ILLUSTRATION    OF   THE    CASH    ACCOUNT,   CLOSED 


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Explanation.  The  above  is  the  same  account  which  was  illustrated  on  the  previous 
page,  but  it  has  been  closed  with  a  balance.  The  left  side  is  called  the  debit  side  (abbre- 
viated Dr.).  The  right  side  is  called  the  credit  side  (abbreviated  CV.).  The  small  figure 
below  the  lowest  item,  or  last  entry,  on  each  side,  represents  a  lead  pencil  footing. 
Observe  that  nothing  is  written  in  the  cents  column  when  the  amount  is  even  dollars. 


aXIESTIONS 

How  was  the  balance  ascertained? 

What  entry  was  then  made?  Red  ink  was  used  because  the  entry,  though  appearing  on  the  credit 
side,  does  not  as  a  matter  of  fact  represent  money  paid  out. 

Why  does  the  credit  footing  now  exactly  equal  the  debit  footing? 

On  which  side  is  the  balance  entered  below  the  ruling?     (This  is  called  "bringing  the  balance  down".) 

How  much  larger  was  the  debit  side  than  the  credit  side  before  closing?  How  much  larger  is  it 
now?     'What  do  you  think  is  the  advantage  of  closing  the  account? 


THE    CASH    ACCOUNT  _,  ■  >     ,     ,      ,  ,,,    _  7, , 

In  order  to  fix  the  form  of  the  account  in  your  mind,  write  the  heading  Cash  at  the 
top  of  a  loose  sheet  of  paper  ruled  like  the  model  (ledger  paper)  and  make  the  entries 
required  for  the  illustrative  exercise.  Note  carefully  across  what  columns  in  the  illustra- 
tion the  single  horizontal  line  (the  line  of  addition)  is  ruled;  make  the  same  observations 
regarding  the  double  line  (used  for  balancing).  Be  sure  to  get  the  year  dates  in  the  right 
places.  Be  sure  that  the  single  vertical  red  ruling  in  each  money  column  divides  dollars 
from  cents. 

Order  of  Closing  an  Account  -with  a  Balance 

1.  Add  each  column.  For  convenience  you  may  write  the  totals  in  the  columns,  making  small, 
neat  lead  pencil  figures. 

2.  Find  the  difference  and  enter  it  on  the  smaller  side  in  red  ink,  dating  the  entry  properly  and 
writing  the  word  "Balance"  in  the  wide  column.  Place  a  check  mark  in  the  narrow  column  between  the 
wide  column  and  the  money  column. 

3.  Rule  a  single  line  across  the  debit  and  credit  money  columns  and  add  each  column.  The  totals 
must  agree  and  must  be  on  the  same  line. 

4.  Rule  a  double  line  across  all  but  the  two  wide  colunms,  on  the  first  line  below  the  footings. 
6.  Bring  down  the  balance  in  black  ink  on  the  side  opposite  that  on  which  it  appears  in  red. 

Summary  of  the  Cash  Account 

Cash  is  money  or  its  equivalent. 

An  account*  headed  Cash  is  kept  by  the  bookkeeper. 

Entries.     All  receipts  and  payments  of  cash  are  entered  in  the  cash  account. 
■  Rule.     Debit  the  cash  account  when  cash  is  received.      Credit    the  cash  account 
when  cash  is  paid  out. 

Result.  The  difference  between  the  total  of  the  debit  side  and  the  total  of  the 
credit  side  at  any  time,  is  the  amount  of  cash  which  should  be  on  hand  at  that  time.  This 
is  called  the  balance. 

Note.  The  cash  account  is  one  of  several  different  kinds  of  account.  The  same  ruled  form  is  used 
for  all,  and  all  are  ruled  in  the  same  way  at  the  time  of  closing.  The  forms  shown  are  known  as  "skeleton" 
or  incomplete  forms.  Later  you  will  learn  the  use  of  the  columns  which  are  not  filled  out  in  the  skeleton 
forms.     All  accounts  are  kept  in  the  ledger,  or  book  of  accounts. 

Prepare  Exercise  1  on  a  sheet  of  ledger  ruled  paper,  or  on  the  back  of  the  sheet  on 
which  you  copied  the  illustration  of  the  cash  account,  and  submit  it  to  your  teacher  for 
approval.  When  Exercise  1  has  been  approved,  prepare  Exercise  2  on  the  same  page, 
leaving  six  blank  lines  between  the  two  exercises.  Write  the  heading  Cash  again,  and  one 
line  below  it  rule  a  double  line  across  the  page,  so  that  it  will  look  like  the  heading  of  a 
new  page.  See  the  illustration  on  page  9  of  an  account  opened  below  the  top  of  the 
page.  After  Exercise  2  has  been  approved,  copy  the  page  containing  the  two  exercises 
on  page  1  of  your  ledger  (Blanks  No.  I,  Book  B).  In  preparing  these  exercises,  enter 
cash  on  hand  at  the  beginning  on  the  debit  side. 

The  following  transactions  contain  the  facts  from  which  a  cash  account  is  to  be  con- 
structed. Open  an  account  headed  Cash,  and  make  the  entries  required.  Then  close 
the  account  as  shown  in  the  illustration  on  page  6. 

*The  student  will  have  a  better  understanding  of  accounts  if  he  will  think  of  each  account  as  a  simple 
problem  in  arithmetic,  in  which  certain  facts  are  given  from  which  he  must  determine  certain  results. 
The  problem  of  cash,  simply  stated,  is  this:  If  I  receive  stated  sums  of  money,  and  pay  out  stated  sums 
of  money,  how  much  money  have  I  remaining?  In  order  to  keep  a  record  of  the  facts  and  at  the  same 
time  have  them  arranged  in  convenient  form  for  easy  solution,  they  are  entered  in  accounts. 


ACCOUNTS 
EXERCISE   1 

191— 

Jan.       1.  I  had  cash  on  hand,  $500.00. 

3.  I  paid  cash  for  insurance,  $57.50. 

3.  I  paid  cash  for  taxes,  $101.76. 

5.  I  received  cash  for  a  horse  which  I  sold,  $175.00. 

6.  I  paid  a  cash  fee  to  a  notary,  $1.25. 

7.  I  paid  for  merchandise  in  cash,  $84.63. 

8.  I  paid  Smith  &  Co.'s  bill  in  cash,  $31.71. 

9.  I  received  cash  from  Brown  &  Co.,  which  they  owed  me,  $42.75. 
t-  id  I  paid  freight  charges  on  merchandise  in  cash,  $12.67. 

13.  I  paid  cash  for  harness,  $43.25. 

14.  I  received  cash  due  me  for  interest,  $17.16. 

15.  I  paid  C.  E.  Burton  $15.00  in  cash,  a  part  of  what  I  owed  him. 
17.  I  paid  workmen  in  cash  for  painting  my  store,  $65.00. 

19.  I  donated  cash  to  a  charitable  association,  $25.00. 

20.  I  paid  the  clerk's  wages  for  one  week  in  cash,  $12.50. 

21.  I  received  cash  for  merchandise  sold,  $73.56. 

21.  Close  the  account  with  a  balance  Jan.  21,  bringing  the  balance  down  as 
of  Jan.  22  (That  is,  date  the  balance  brought  down  Jan.  22,  as  it  indicates 
the  amount  on  hand  on  the  morning  of  that  day). 


EXEBCISE  2 
191  — 

Feb.     1.     Cash  on  hand,  $103.09. 

1.  I  paid  my  store  rent  for  February  in  cash, '$50.00. 

2.  I  sold  merchandise  for  cash,  $35.25. 

4.  I  paid  the  clerk's  wages  for  one  week  in  cash,  $12.50. 

6.  I  received  F.  R.  Wheeler's  check  for  an  amount  due  me,  $27.60. 

7.  H.  W.  Roberts  gave  me  his  check  for  what  he  owed  me,  $24.50. 

8.  I  paid  for  merchandise  by  check,  $32.50. 

10.  My  cash  sales  of  merchandise  today  amounted  to  $18.65. 

11.  I  paid  the  clerk's  salary  in  cash,  $12.50. 
11.     I  paid  the  scrubwoman  $1.75. 

14.  I  sold  Geo.   N.   Patten  goods  worth  $21.65  and  received  cash  from  him 
in  payment. 

15.  On  opening  my  mail,  I  found  a  postal  money  order  for  $15.00  sent  by 
E.  N.  Harris  in  payment  of  my  bill  against  him. 

16.  I  mailed  to  the  First  National  Bank  my  check  for  $6.00,  due  for  interest 
on  money  borrowed. 

17.  I  bought  merchandise  for  cash,  $23.78. 

18.  I  paid  the  clerk's  salary  as  before. 

19.  I  received  a  check  for  $40.00  from  Harry  N.  Lawton,  who  owed  me  $75.00. 

20.  I  paid  for  postage  stamps  in  cash,  $5.00. 

21.  I  paid  the  drayman  $2.30  in  cash. 


THE    MERCHANDISE    ACCOUNT 


.-9; 


Lesson  II 

THE   MERCHANDISE    ACCOUNT 

Merchandise  is  the  goods  or  wares  bought  and  sold  for  profit  in  any  certain  hne 
of  business. 

In  the  grocery  business,  groceries  are  merchandise.  At  the  butcher  sliop,  meats  arc  merchandise. 
■  The  coal  man  deals  in  coal  as  his  merchandise.  The  clothier  considers  suits  and  overcoats  merchandise. 
A  man  owning  a  hardware  store  might  buy  groceries,  meats,  coal,  and  clothes  throughout  the  year,  yet 
these  things  would  not  be  merchandise  to  him.     Why? 

One  of  the  problems  of  bookkeeping  is  to  determine  the  amount  of  profit  or  loss  in 
handling  merchandise.  To  determine  this,  I  must  first  know  what  the  merchandise  sold 
has  cost  me  and  what  I  have  sold  it  for.  I  keep  a  record  of  these  matters  under  the 
head  Merchandise  in  the  ledger,  entering  costs  (amounts  of  purchases)  on  one  side  of  the 
account,  and  entering  returns  (amounts  of  sales)  on  the  other. 

Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the  entries  in  the 
Illustration.  In  tracing  these  transactions,  j'ou  are  to  consider  nothing  but  merchandise. 
Ask  yourself  in  each  case  what  ]\Idse.  was  bought  or  what  Mdse.  was  sold.  (Jlerchandise 
is  abbreviated  "Mdse."     It  is  not  customary  to  abbreviate  it  as  a  heading  of  an  account.) 

ILLUSTRATIVE    EXERCISE 


191— 

Sept.    1. 

I  bought  Mdse., 

$720.00 

2. 

I  bought  Mdse., 

420.00 

3. 

1  bought  Mdse., 

560.00 

5. 

I  sold  Mdse., 

480.00 

6. 

I  sold  Mdse., 

520.00 

There  were  no  other  transactions  durin 

or  gain  on  Mdse.  for  September. 

Sept.    8.     I  sold  Mdse.,         $140.00 
9.     I  bought  Mdse.,      .300.00 
10.     I  sold  Mdse.,  750.00 

15.     I  sold  all  Mdse.  then 

on  hand  for  640.00 

;  September.     Find  the  amount  of  my  loss 


ILLUSTRATION 


y^^'A-'C^i^  '^-T-z^.Cc.-L^y 


"Z.. 


->S^z:z.^-'7^^- 


24^ 


yso 


'10";;      ;    ,*,    *''-  ACCOUNTS 

A  bookkeeper  sometimes  has  to  write  more  than  one  heading  on  a  ledger  page.  The  illustration 
shows  how  an  account  will  appear  which  is  opened  below  the  top  of  the  page. 

Explanation.  The  foregoing  is  an  illustration  of  a  merchandise  account  as  it  appears 
when  all  goods  have  been  sold.  The  small  figures  at  the  bottom  of  each  column  of  black 
ink  entries  represent  lead  pencil  footings.  Study  the  form  carefully  and  answer  the 
following  questions: 

QUESTIONS 
Entries  of  what  kind  are  on  the  debit  side? 
Entries  of  what  kind  are  on  the  credit  side? 
What  was  the  selling  price  of  all  goods  sold  during  September? 
What  was  the  cost  of  all  goods  sold  during  September? 
What  was  the  gain,  and  how  was  it  found?     Why? 

What  result  would  have  been  shown  had  the  debit  side  been  the  greater? 
What  was  the  percent  of  profit;  that  is,  at  what  percent  above  cost  did  the  goods  sell? 

In  order  to  fix  the  form  of  the  account  in  your  mind,  prepare  it  on  a  loose  sheet  of 
ledger  ruled  paper.  Do  not  copy  from  the  model,  but  cover  the  model  and  do  your  work 
independently. 

When  this  has  been  done,  compare  your  work  with  the  model  as  to  every  detail.  Is 
the  result  correct  and  placed  in  the  right  place?  Is  your  exercise  ruled  exactly  like  the 
model?  Is  there  a  year  date  at  the  top  of  each  date  column?  Are  dollars  and  cents 
separated  by  the  single  vertical  red  ruling  in  each  money  column? 

Summary  of  the  Merchandise  Account 

Merchandise  is  the  goods  or  wares  bought  and  sold  for  profit  in  any  given  business. 
A  merchandise  account*  is  usually  kept  in  the  ledger  of  a  trading  business. 

Entries.  All  amounts  of  Mdse.  bought  and  all  amounts  of  Mdse.  sold  are  entered 
in  the  merchandise  account. 

Rule.  Debit  the  merchandise  account  when  Mdse.  is  bought  (that  is,  when  Mdse. 
is  received  or  costs  value) ;  credit  the  merchandise  account  when  Mdse.  is  sold  (that  is, 
when  Mdse.  is  disposed  of  or  produces  returns). 

Result.  When  all  Mdse.  is  sold,  the  difference  between  the  debit  and  credit  totals 
shows  a  gain,  if  the  credit  side  be  larger;  or  a  loss,  if  the  debit  side  be  larger. 

Prepare  Exercise  3  on  a  loose  sheet  of  ledger  paper  or  on  the  back  of  the  sheet  you 
used  for  the  illustration.  Remember  that  you  are  considering  only  the  purchases  and 
sales  of  Mdse.     Ask  yourself  in  each  case  whether  Mdse.  is  being  bought  or  sold. 

EXERCISE  3 
191  — 

March     1.  I  bought  Mdse.  for  cash,  $1170.60. 

2.  I  paid  $45.37  in  cash  for  Mdse. 

2.  I  purchased  Mdse.  valued  at  $12.75. 

5.  I  sold  Mdse.  for  cash,  $274.25. 


*Remember  that  the  Mdse.  account  is  nothing  but  a  problem  in  arithmetic.  Simply  stated,  the 
problem  is:  I  made  certain  purchases  of  Mdse.  and  certain  sales.  When  all  had  been  sold,  what  was 
my  profit  or  loss? 


THE    MERCHANDISE    INVENTORY 


11 


March     6.     I  sold  Mdse.  to  W.  J.  Burnham  on  credit,  $157.20. 
7.     I  paid  $46.50  for  Mdse.  by  check. 
9.     I  bought  Mdse.  for  cash,  $215.46. 
10.     F.  H.  Waddell  gave  me  his  note  for  Mdse.,  $645.00. 
15.     I  sold  all  Mdse.  then  on  hand  for  cash,  $625.00. 
No  other  transactions  took  place  during  March.     Find  the  amount  of  gain  or  loss 
for  March. 

THE  MERCHANDISE  INVENTORY 
In  the  foregoing  illustration  and  exercise  it  was  assumed  in  each  case  that  there  was 
no  Mdse.  on  hand  when  the  account  was  opened  and  that  all  was  sold  before  closing  the 
account.  This  is  seldom  the  condition.  There  is  usually  some  Mdse.  on  hand  at  the 
beginning  of  the  period  which  the  account  covers  and  some  Mdse.  on  hand  at  the  close 
of  that  period.     The  Mdse.  on  hand  at  any  time  is  called  the  Inventory. 

Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the  Illustration. 

ILLUSTRATIVE    EXERCISE 
191— 

Oct.    1.  Mdse.  inventory  on  hand,  $1275.00. 

2.  I  bought  Mdse.  of  J.  V.  Farwell  &  Co.  on  credit,  $1324.50. 

3.  I  sold  Mdse.  to  Harry  N.  Kirby  on  account,  $524.75. 
3.  I  sold  Mdse.  to  Fred  H.  Pollard  for  cash,  $196.50. 

5.  B.  F.  Dyer  bought  Mdse.,  giving  me  his  note  for  it,  $243.60. 

6.  D.  H.  Lloyde  gave  me  his  cheek  for  Mdse.,  $245.00. 

15.  I  paid  cash  for  Mdse.,  $126.50. 

16.  I  sold  Mdse.  to  H.  B.  Boyles  on  credit,  $405.00. 
No  further  sales  were  made  during  the  month.     On  Oct.  31 

worth  $1200.00.     What  was  the  gain  or  loss  for  October? 


ILLUSTRATION 


oods  were  on  hand 


^^^^^^-^  ''>^  /vjl"'^^ 


6U 


^ 


'-^/■^/ 


^    ' 2-6?0 


^(L. 


v^     / 


t/42-'*'Tf<»2.^^-7^ 


Explanation. 

an  inventory. 


The  above  is  an  illustration  of    u    merchandise    account    closed  with 


12  _         ACCOUNTS 

QTTESTIONS 

What  was  the  inventory  of  goods  on  hand  Oct.  1? 

What  was  the  total  of  goods  purchased  during  October? 

What  was  the  inventory  of  goods  on  hand  October  31?     Where  and  how  was  it  entered? 

What  was  the  cost  of  the  goods  sold  during  October? 

What  was  the  total  of  sales  during  October? 

What  was  the  gain  on  Mdse.  for  October? 

What  was  the  per  cent  of  gain,  based  upon  the  cost  of  goods  sold? 

Could  the  amount  of  gain  have  been  ascertained  if  the  inventory  had  not  been  known? 

Note.  The  inventory  on  hand  Oct.  1  was  not  a  part  of  the  purchases  for  the  month,  nor  was  the 
inventory  of  Oct.  31  a  part  of  the  sales  for  the  month.  Yet  these  must  be  known  before  the  Mdse.  gain 
can  be  found.  The  in\'entory  on  hand  at  the  first  of  the  month  must  be  added  to  the  purchases,  and 
from  the  sum  the  inventory  on  hand  at  the  last  of  the  month  must  be  deducted,  in  order  to  arrive  at  the  true 
cost  of  the  goods  sold.  The  former  is  added  to  the  purchases  by  being  placed  in  the  debit  column,  but 
as  there  is  no  way  to  show  subtraction  in  bookkeeping,  the  latter  is  entered  on  the  opposite  or  credit  side, 
and  this  has  the  same  effect  as  a  deduction  from  the  debit  side.  It  is  entered  in  red  ink  because  it  is  not 
a  sale,  though  appearing  in  the  sales  colunm. 

In  bookkeeping,  add  the  Mdse.  inventory  at  the  time  of  clo.sing  to  the  credit  side; 
the  difference  between  the  total  so  secured  and  the  debit  total  will  be  a  gain  or  a  loss  and 
is  entered  on  the  smaller  side  in  red  ink.     When  will  it  be  a  gain?     When  a  loss? 

The  account  is  then  ruled  and  footed.  The  inventory  is  brought  down  into  the 
debit  side,  to  be  added  to  the  cost  of  Mdse.  for  the  next  month. 

Note.  Sometimes  it  is  said  that  the  bookkeeper  is  to  imagine  that  all  goods  on  hand  are  sold  at 
inventory  price  at  the  end  of  the  month  and  at  once  bought  back.  For  several  good  reasons  which  you 
cannot  at  this  time  appreciate,  this  line  of  reasoning  is  false.  However,  you  may  treat  it  just  as  you 
would  treat  a  sale  and  subsequent  repurchase,  so  far  as  making  the  entries  is  concerned,  and  this  will 
make  the  entries  easy  to  remember. 

Summary  of  the  Merchandise  Inventory 

The  gain  (or  loss)  on  Mdse.  cannot  be  determined  unless  it  be  known  how  much 
unsold  stock  is  on  hand.  The  unsold  stock  is  counted  and  a  valuation  (cost  price  or  less) 
placed  upon  it.  The  list  of  quantities,  kinds,  and  values  of  stock  on  hand  is  known  as 
the  inventory.  The  total  of  the  inventory  on  hand  at  the  beginning  of  a  certain  period 
must  be  added  to  the  purchases  for  that  period  and  the  inventory  at  the  end  of  the  period 
deducted  in  order  to  find  the  cost  of  the  goods  sold.  This  deduction  is  accomplished  by 
a  red  ink  entry  on  the  opposite  or  credit  side. 

Prepare  Exercise  4  at  the  bottom  of  the  same  sheet  on  which  you  wrote  Exercise 
3,  leaving  at  least  six  blank  lines  between  the  two  accounts.  Remember  that  you  are 
considering  nothing  but  purchases  and  sales  of  Mdse.  When  both  exercises  have  been 
approved  by  your  teacher,  copy  them  or  write  them  without  copying  (as  your  teacher 
shall  direct)  on  page  2  of  your  ledger  (Blanks  1,  Book  B). 

EXEBCISE  4 
191— 

Apr.     1.     I  bought  Mdse.  amounting  to  $1475.50. 

2.     I  purchased  of  C.  B.  Hawkins  Mdse.  invoicing  at  $.585.75. 
4.     I  sold  to  Jas.  B.  King,  for  cash,  Mdse.  invoicing  at  .$45.60. 


THE    MERCHANDISE    INVENTORY  13 

Apr.     7.     H.  M.  Adams  bought  on  credit  a  bill  of  goods  worth  $20.50. 
9.     Sold  to  G.  J.  Kingsbury,  on  his  note,  Mdse.  worth  $75.62. 
10.     Bought  Mdse.  billetl  at  $105.10,  giving  my  check  in  payment. 
14.     Sold  Mdse.  to  H.  M.  Adams  on  account,  $241.26. 
The  stock  of  goods  on  hand  April  15  was  inventoried  at  $1996.75  (cost  price).    Before 
closing  the  account  answer  the  following  questions: 

aUESTIONS 

What  was  the  cost  of  goods  purchased? 

What  was  the  value  of  goods  remaining  on  hand? 

What  was  the  cost  of  the  goods  sold? 

What  was  the  total  of  sales? 

Was  there  a  gain  or  loss,  and  how  much? 

What  was  the  percentage  of  profit  or  loss,  based  upon  the  cost  of  the  goods  sold? 

Close  the  account  as  of  April  15,  proceeding  as  follows: 

Order  of  Closing  Accounts  having  Inventories 

1.  Foot  the  two  sides,  making  a  neat  lead  pencil  footing  close  beneath  the  last  item  in  each  column. 

2.  Enter  the  inventory  in  red  ink.     (When  it  is  an    inventory  of  value  belonging  to  the  business, 
as  in  the  foregoing  instance,  it  is  entered  on  the  right-hand  side.) 

3.  The  difference  between  the  two  sides  as  they  now  stand  is  a  loss  or  a  gain.     Enter  it  upon  the 
smaller  side  in  red  ink  with  a  proper  explanation. 

4.  Rule  the  single  lines  of  addition  opposite  each  other  on  the  same  blue  line  and  foot  the  two  columns. 
The  footings  should  be  equal  and  just  opposite  each  other. 

5.  Rule  the  double  line  of  balancing,  across  all  but  the  two  viride  column.s. 

6.  Bring  the  inventory  down  in  black  ink  upon  the  side  opposite  that  on  which  it  appears  in  red. 

Continue  the  transactions  of  Exercise  4 — Continued,  on  the    same    account,    leaving 
no  blank  lines  on  either  side  below  the  rulings. 

EXERCISE  4— Continued 
191  — 
Apr.  17.     Bought  Mdse.  for  cash,  $265.35. 

20.  Sold  Mdse.  to  B.  C.  Ordway  for  cash,  $36.79. 

21.  B.  F.  Andrews  bought  Mdse.  from  me  on  credit,  .140.00. 

22.  D.  B.  Renway  &  Co.  sold  me  Mdse.  on  credit,  $75.60. 

24.  Geo.  H.  Gibbs  gave  me  his  note  for  Mdse.,  $65.63. 

25.  Paid  for  Mdse.  in  cash,  $103.26. 

26.  Sold  B.  F.  Andrews  on  credit  Mdse.  invoicing  at  .S87.50. 

On  Apr.  30  the  Mdse.  inventory  (taken  at  cost)  amounted  to  $2257.28.     Answer  the 
following  questions  before  attempting  to  close  the  account: 

aUESTIONS 

What  was  the  cost  value  of  goods  on  hand  Apr.  15? 

What  was  the  total  of  goods  purchased  between  Apr.  15  and  Apr.  30? 

What  was  the  cost  value  of  goods  on  hand  Apr   30? 

What  was  the  cost  value  of  goods  sold  between  Apr.  15  and  .Apr.  30? 

■\Miat  was  the  total  of  sales  between  Apr.  15  and  Apr.  30? 

Wliat  was  the  amount  of  gain? 

What  was  the  per  cent  of  gain? 

Under  what  circumstances  would  a  loss  have  been  shown? 

Close  the  account. 


14  ACCOUNTS 

Lesson  III 

ACCOUNTS   WITH    CASH   AND    MERCHANDISE 

The  one  series  of  transactions  following  involves  two  separate  accounts,  one  with 
cash  and  one  with  merchandise.  Open  an  account  headed  Cash  with  a  balance  of  $5000.00 
on  May  1,  and  open  an  account  with  Merchandise  with  an  inventory  of  $7650.00  on  Maj^  1. 
Then  enter  the  following  transactions.  Note  that  both  accounts  are  affected  in  each 
transaction.  When  Mdse.  is  bought,  cash  is  parted  with.  When  Mdse.  is  sold  or  parted 
with  cash  is  received.  Make  both  the  cash  entry  and  the  Mdse.  entry  for  one  day  before 
proceeding  to  the  next.     Give  each  account  a  half  page. 


KXESCISE  6 

191— 

May    2.  Bought  Mdse.  for  cash,  $256.25. 

3.  Sold  Mdse.  for  cash,  $54.60. 

4.  Received  cash  for  Mdse.,  $45.75. 

7.  Paid  cash  for  Mdse.,  $110.00. 

8.  Sold  Mdse.  for  cash,  $90.00. 

9.  Sold  for  cash  Mdse.  amounting  to  $3.3.63. 

10.     H.  C.  Updike  gave  me  h's  check  for  Mdse.,  $25.00. 

12.     Bought  Mdse.  invoicing  at  $57.60,  giving  my  cheek  for  it. 

14.     Sold  Mdse.  for  cash,  $110.65. 
Goods  on  hand  May  15  were  valued  at  $7884.25. 

Close  both  accounts  properly.     When  they  have  been  approved,  copy  them  (or  again 
work  them,  if  your  teacher  shall  so  direct)  on  page  3  of  your  ledger  (Blanks  No.  1,  Book  B). 


Rule  for  Debiting  and  Crediting 

You  have  learned  that  two  of  the  accounts  a  bookkeeper  has  to  keep  are  the  cash 
account  and  the  merchandise  account;  that  an  account  headed  Cash  and  an  account 
headed  Merchandise  are  opened  in  the  ledger;  that  transactions  involving  cash  received 
and  cash  paid  out  (or  disposed  of)  are  entered  in  the  cash  account  and  transactions  involv- 
ing Mdse.  p.urchased  (or  received)  and  Mdse.  sold  (or  disposed  of)  are  entered  in  the  Mdse. 
account.  You  have  learned  that  the  accounts  are  Similar  in  form;  that  each  has  two 
sides,  a  left  and  a  right;  that  the  left  side  is  called  the  debit  side,  and  that  the  right  side 
is  called  the  credit  side.  You  have  learned  that  when  cash  is  received  tl^e  cash  account 
is  debited,  and  that  when  Mdse.  is  received  the  Mdse.  account  is  ece^ed.  This  is  true 
of  all  accounts — whenever  anything  is  received,  the  account  of  that  thing  is  debited. 
Similarly,  it  is  always  true  that  whenever  anything  is  disposed  of  or  parted  with,  the 
account  of  that  thing  is  credited.  Hence  the  following  rule,  which  you  are  now  asked 
to  learn: 

Debit  the  account  of  that  which  is  received;  credit  the  account  of  that  which  is  disposed  of. 


ACCOUNTS    WITH    CASH    AND    MERCHANDISE  15 

REVIEW   QUESTIONS 

What  is  cash? 

How  many  sides  has  an  account  and  wiiat  are  they  called? 

'VMiat  is  the  cash  account  and  how  is  it  Ivept? 

What  is  meant  by  the  "balance"  of  the  cash  account  and  how  is  it  found? 

How  is  the  cash  account  closed? 

What  is  Mdse.?     Explain  why  what  is  Mdse.  to  one  person  may  not  be  Mdse.  to  another. 

WTiat  is  the  merchandise  account  and  liow  is  it  Icept? 

What  is  a  Mdse.  inventory? 

What  is  done  with  the  inventory  in  clo.sing? 

WTiat  result  is  shown  by  the  merchandise  account? 

Descrilie  the  closing  of  the  mercliandise  account. 

How  can  you  find  the  cost  of  the  goods  sold  during  any  certain  period? 

How  must  the  percent  of  profit  be  found? 

Can  the  merchandise  account  ever  show  any  result  but  a  gain?    Explain  fully, 


CHAPTER  II 

JOURNALIZING 

Lesson  IV     - 
THE   JOURNAL.     THE   REAL   ESTATE   ACCOUNT 

Examine  the  following  transactions  and  see  if  you  can  tell  what  took  place  in  each 
case.     Then  tletermine  what  it  is  that  takes  place  whenever  any  transaction  occurs. 

191— 

Sept.  1.     I  bought  Mdse.  for  cash. 

What  thing  was  received  or  cost  value?  What  thing  did  it  cost?  What  thing  was  disposed  of  or 
produced  returns?     What  thing  did  it  produce? 

Sept.  2.     I  sold  Mdse.  for  cash. 

What  was  received  or  cost  value?  Wliat  did  it  cost?  What  was  disposed  of  or  produced  returns? 
What  did  it  produce? 

Sept.  3.     I  bought  a  store  building  (Real  Estate)  for  cash.  I 

What  was  received  or  cost  value?  What  did  it  cost?  What  was  disposed  of  or  produced  returns? 
What  did  it  produce?  ' 

Sept.  4.     I  exchanged  the  store  building  for  a  stock  of  Mdse. 

What  was  received  or  cost  value?  What  did  it  cost?  What  was  disposed  of  or  produced  returns? 
What  did  it  produce? 

Being  engaged  in  the  furniture  business,  I  recorded  all  the  transactions  of  my  busi- 
ness in  the  order  in  which  they  occurred,  in  such  a  way  that  the  form  of  the  entries  would 
show  what  was  received  (or  cost  value)  in  each  case,  and  what  was  disposed  of  (or  pro- 
duced returns).  Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the 
Illustration  and  see  for  yourself  how  this  is  done. 

ILLUSTRATIVE     EXERCISE 
191  — 

Sept.  1.  I  bought  for  cash  5  oak  dining  tables,  at  $20.50,  $102.50. 

2.  I  sold  for  cash  2  oak  dining  tables,  at  $.33.00,  $66.00. 

3.  I  bought  for  cash  36  Mission  oak  dining  chairs,  at  $4.00,  $144.00. 

4.  I  bought  a  store  building  and  lot  for  cash,  $9500.00. 

5.  I  sold  for  cash,  6  Mission  oak  dining  chairs,  at  $6.75,  $40.50. 

Explanation.  The  form  shown  is  apart  of  the  journal.  This  form  of  journal  is  some- 
times called  the  "explanatory  journal"  to  distinguish  it  from  the  old-fashioned  journal, 
which  did  not  contain  the  explanatory  matter.  The  old  way  was  to  write  the  histor" 
of  the  transactions,  without  journalizing  them,  in  a  "day  book."     This  was  done  aS^t 

16 


THE    JOURNAL 


17 


transactions  occurred.  Later  each  transaction  was  journalized,  without  explanation,  in 
a  separate  book  which  might  be  called  a  non-explanatory  or  skeleton  journal.  The  modern 
practice  of  combining  both  books  in  an  explanatory  journal  is  certainly  more  economical 
of  time  and  space. 

ILLUSTRATION 


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N^CB  Of  AOeOWHT  to  B8  DSBITZD 


VP^d^L^y. 


iKOUNT  seb:  rea 


VaU^y 


J 


tX^-d^i^CTTH^'-i 


f^A^. 


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f^iPO 


^OUNT  C 


£^ 


fJ'i^O 


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■■Q^|^^^-^<^-'^c^eui^n^^y7^■c^d<^^t-^7-?2yff-^^^l^^ 


QUESTIONS:     (To  assist  you  in  studying  the  above  form.) 
What  is  the  meaning  of  the  abbreviation  above  the  left-hand  money  column? 
What  is  the  meaning  of  the  abbreviation  above  the  right-hand  money  column? 
Where  is  the  year  date  written? 
Where  is  the  date  of  each  transaction  written? 

Where  is  the  name  of  the  thing  received  (or  which  cost  value)  written  in  each  ease? 
On  what  line  and  in  which  column  is  the  amount  of  the  thing  received  (or  which  cost  value)  written 
in  each  case? 

Where  is  the  name  of  the  thing  disposed  of  (or  which  produced  a  return)  written  in  each  case? 
On  what  line  and  in  which  column  is  the  amount  of  the  thing  disposed   of  (or  which  produced  a 
n)  written  in  each  case? 
Where  is  the  explanation  of  what  took  place  written  in  each  case? 


18  JOURNALIZING 

By  inspecting  tlie  form  shown,  you  will  see  that  a  journal  entry  consists  of  six  parts, 
a.s  follows:  (1)  The  date.  The  date  is  written  above  each  entry.  At  the  top  of  each 
page  the  name  of  the  month  and  the  year  date  must  appear,  but  the  day  of  the  month 
alone  is  sufficient  above  the  other  entries,  except  when  a  new  month  is  begun.  (2)  The 
name  of  the  account  to  be  debited.  (3)  The  amount  of  the  debit  item.  (4)  The  name 
of  the  account  to  be  credited.  (5)  The  amount  of  the  credit  item.  (6)  A  full  and  com- 
plete explanation  of  the  transaction,  from  which  no  essential  detail  nor  any  fact  that 
may  be  valuable  for  reference  should  be  omitted. 

Each  part  must  be  exactly  in  its  proper  position  as  shown  by  the  model  form.  For 
uniformity  of  appearance,  the  date  should  be  sqoarely  in  the  center  of  the  blank  lines. 
Note  carefully  the  indentation  of  the  name  of  the  account  to  be  credited,  and  the  indenta- 
tion of  the  first  line  of  the  explanation.  The  amount  of  the  debit  item  must  be  on  the 
same  line  as  the  name  of  the  account  to  be  debited,  and  in  the  left-hand  money  column. 
The  amount  of  the  credit  item  must  be  on  the  same  line  as  the  name  of  the  account  to 
be  credited,  and  in  the  right-hand  money  column.  The  explanation  should  always  be 
worded  as  from  the  standpoint  of  the  business;  thus  when  money  is  received  from  Smith 
we  would  say  "Rec'd  from  Smith"  not  "Smith  paid,"  etc. 

THE    REAL   ESTATE   ACCOUNT 

Among  the  things  shown  as  received  (or  costing  value)  in  the  illustration  of  the 
journal,  is  real  estate.  You  will  naturally  infer  that  it  is  desirable  to  keep  records  of 
real  estate  received  (or  which  costs)  and  disposed  of  (or  which  produces  returns),  and 
that  one  of  the  problems  of  bookkeeping  is  to  determine  the  gain  or  loss  on  real  estate.  An 
account  is  opened  in  the  ledger  under  the  head  Real  Estate,  which  is  kept  exactly  Uke  the 
Mdse.  account.     No  special  description  or  illustration  of  this  account  is  necessary. 

Entries.  Amounts  of  all  purchases  and  sales  of  real  estate  are  entered  in  the  real 
estate  account. 

Rule.  Debit  the  real  estate  account  when  real  estate  is  received  (or  costs  value). 
Credit  the  real  estate  account  when  real  estate  is  disposed  of  (or  produces  returns). 

Result.  When  all  real  estate  is  disposed  of,  the  difference  between  the  debit  and 
credit  totals  is  a  gain  if  the  credit  side  be  the  larger.  If  the  debit  side  he  larger,  a  loss 
is  shown. 

Inventory.  Real  estate  on  hand  at  the  time  of  closing  the  account*  is  always  a 
credit  inventory,  as  in  the  merchandise  account,  and  is  handled  in  exactly  the  same  way. 

Closing.  Close  the  account,  for  the  present,  precisely  as  you  have  learned  to  close 
the  merchandise  account. 


*Since  the  value  of  real  estate  is  usually  arrived  at  by  deducting  a  certain  per  cent  of  its  original 
value,  for  depreciation,  it  is  sometimes  contended  that  the  inventory  is  the  real  result  of  the  account, 
and  that  the  loss  or  gain  can  be  considered  the  result  only  when  real  estate  is  being  traded  in  for  profit. 
Two  facts  are  certain,  however: — (1)  The  real  estate  account  does  have  an  inventory,  and  (2)  The  real 
estate  account  does  show  a  loss  or  gain  (usually  a  loss,  when  it  is  an  investment  account  and  not  a  trading 
account).  These  two  facts  being  true,  some  ground  is  furnished  for  either  view  of  the  case.  It  matters 
not,  however,  whether  the  inventory  be  considered  the  result,  or  the  loss  be  considered  the  result,  when 
the  simple  form  above  described  is  used,  as  the  process  of  closing  is  the  same  in  either  case.  It  is  easier 
for  the  student  at  this  point  to  follow  the  line  of  reasoning  suggested  above  in  the  text. 


THE    REAL    ESTATE    ACCOUNT  19 

Summary  of  Journalizing 

Business  consists  in  the  trading,  or  exchanging  between  the  trading  parties,  of  things 
having  value.  A  business  transaction  consists  of  the  equal  exchange  of  things  having 
value;  one  thing  is  received  (or  costs  value),  and  some  other  thing  is  disposed  of  (or  pro- 
duces returns). 

Separate  accounts  are  kept  in  the  ledger  with  things  having  value  in  which  the  busi- 
ness deals.  Whenever  any  business  transaction  takes  place,  the  account  of  the  thing 
received  (or  which  costs  value)  is  debited,  and  the  account  of  the  thing  disposed  of  (or 
which  produces  returns)  is  credited.  These  accounts  in  the  ledger  are  not  debited  and 
credited  directly,  but  a  statement  of  the  debits  and  credits  arising  in  each  transaction  is 
made  in  the  journal.     You  understand  the  cash,  merchandise,  and  real  estate  accounts. 

One  entry  is  made  in  the  journal  for  each  transaction,  and  the  transactions  are 
entered  in  the  journal  at  the  time  of  their  occurrence  and  in  the  order  of  their  occurrence. 
Each  entry  in  the  journal  shows  what  account  is  to  be  debited  and  how  much,  and  what 
account  is  to  be  credited  and  how  much.  The  journal  must  use  the  exact  titles  of  the 
accounts  to  be  debited  and  credited.  It  follows  that  in  order  to  journalize  correctly  the 
bookkeeper  must  know  what  accounts  are  kept  in  the  ledger  and  the  rules  for  debiting 
and  crediting  each.  These  facts  being  known,  all  that  is  necessary  is  to  determine  in 
each  case  what  is  being  received  (or  what  costs  value)  and  what  is  being  disposed  of  (or 
what  produces  returns)  and  to  note  this  information  in  the  journal  in  proper  form. 

Journalize  the  following  transactions  taken  from  the  furniture  business.  Your 
explanations  should  be  full  and  complete.  Be  very  careful  in  your  writing.  Make  plain, 
neat,  compact  letters  and  be  sure  that  your  figures  are  clean-cut  and  easily  read,  and 
placed  squarely  in  the  column  in  which  they  should  be.  Be  sure  that  dollars  and  cents 
in  each  column  are  separated  by  the  single  vertical  red  line.  Avoid  blots  by  being  sure 
that  your  pen  isn't  too  full  of  ink.  Keep  your  hands  clean  and  avoid  soiling  the  page. 
Your  writing  should  not  be  ornamental  or  shaded,  but  plain  and  business-like. 

EXEKCISE  6 
191  — 

June  1.  Bought  from  the  Acme  Furniture  Co.,  for  cash,  2  doz.  elm  kitchen  chairs 
at  $14.70,  $29.40. 

Since  this  is  the  furniture  business,  chairs,  tables,  beds,  and  other  furniture  bought  and  sold  for 
profit  must  be  considered  Mdse.  Mdse.  was  received;  it  cost  value  (that  is,  it  cost  you  the  cash  paid  out 
for  it).  Cash  was  disposed  of;  it  produced  returns  (that  is,  the  cash  parted  ^vith  produced  in  return  the 
Mdse.  received). 

June  2.  Bought  from  the  Balk  will  &  Patch  Furniture  Co.,  for  cash,  1  doz.  cane 
seat  oak  dining  chairs,  $27.00;  7  oak  dining  chairs  at  $2.70  each,  $18.90;  total  $45.90. 

June  3.  Sold  to  W.  G.  Black  for  cash,  3  elm  kitchen  chairs,  at  $2.25,  $6.75;  3  oak 
dining  chairs,  at  $4.50,  $13.50;  total,  $20.25. 

What  was  received,  or  cost  value?     What  was  disposed  of,  or  produced  returns? 

June  3.  I  sold  to  D.  C.  Gibbs,  for  cash,  6  cane  seat  oak  dining  chairs,  at  $3.50, 
$21.00. 

June  4.  Bought  from  Yawman  &  Erbe  for  cash,  for  office  use,  one  sectional  filing 
case,  four  sections  and  base,  $37.50.     (See  the  note  at  the  top  of  page  20.) 


20  JOURNALIZING 

The  thing  received  was  not  Mdse.  Why?  You  will  have  to  consider  this  furniture.  The  furniture 
&  fixtures  account  is  handled  exactly  like  the  merchandise  account  with  which  you  are  familiar. 
Assuming  that  you  are  keeping  an  account  with  furniture  and  fixtures,  make  the  proper  journal  entry, 
using  the  abbreviation  Furn.  &  Fix.  in  the  journal  entry. 

June  6.  I  bought  from  the  Detroit  Furniture  Co.,  15  weathered  oak  dining  chairs, 
at  $3.70  each,  $55.50;  18  leather  seat  oak  dining  chairs,  at  $7  50  each,  $135.00;  total, 
$190.50.     Paid  them  by  check. 

June  7.  I  received  a  letter  from  F.  J.  Lane  ordering  6  leather  seat  oak  dining  chairs, 
at  $11.25  each,  and  inclosing  a  postal  money  order  for  $67.50  in  payment. 

If  you  cannot  get  all  of  the  entry  for  the  following  transaction  in  the  space  remaining  on  page  1, 
turn  the  page  at  once;  do  not  divide  the  entry.     Write  the  full  date,  June  9,  191 — ,  at  the  top  of  page  2. 

V  June  9.     I  sold  to  W.  F.  Fuller  for  cash  4  cane  seat  oak  dining  chairs,  at  $3.50  each, 
$14.00;  and  3  elm  kitchen  chairs,  at  $2.25  each,  $6.75;  total,  $20.75. 

June  11.  I  bought  from  Jas.  S.  Spiegel  &  Sons  3  green  fibre  rush  settees,  at  $16.00 
each,  $48.00;  2  kitchen  cabinets,  oak  front,  at  $36.00,  $72.00;  total,  $120.00.  I  paid 
them  by  check. 

June  13,     I  sold  to  F.  J.  Lane,  for  cash,  1  green  filH-e  rush  settee,  $24.75. 

June  14.  I  bought  from  the  Tobey  Furniture  Co.,  for  cash,  1  revolving  stool,  liirch, 
for  office  use,  $7  50. 

This  was  not  Mdse.     Why?     What  was  it? 

June  15.  I  bought  a  building  and  lot  at  6914  Indiana  Ave.,  the  building  l)eing  for 
use  as  a  storehouse,  and  paid  for  it  by  check,  $4590.00. 

June  16.  I  sold  to  W.  F.  Fuller  1  kitchen  cabinet,  oak  front,  $47.50,  and  1  green 
fibre  rush  settee,  $24.75,  receiving  his  check  for  $72.25  in  payment. 

June  17.  I  bought  from  Ford  &  Johnson  12  all  iron  bedsteads,  at  $4.80  each,  $57.60; 
6  cotton  mattresses,  at  $3.00  each,  $18.00.  Total,  $75.60.  Gave  them  my  clieck  in 
payment. 

June  22.  F.  J.  Lane  returned  to  me  1  green  fibre  rush  settee  for  which  lie  had  jniid 
me  $24.75  in  cash.     I  gave  him  his  money  back. 

June  23.  I  sold  to  W.  G.  Black  for  cash  1  white  wood  kitchen  table,  $10.75;  1  exten- 
sion dining  table,  oak,  $37  50;  1  Mission  ctiina  closet,  quartered  oak,  $56.50.  Total, 
$104.75. 

June  24.  John  Smulski,  a  carpenter,  built  an  addition  to  my  storage  building  (Real 
Estate).  He  furnished  all  materials  and  labor,  and  submitted  a  bill  for  $150.00,  which 
I  settled  by  delivering  to  him  furniture  as  follows:  1  brass  trimmed  bedstead,  $15.00; 
1  Turkish  spring  box  mattress,  $37.50;  1  extension  dining  table,  oak,  $47.50;  6  oak  dining 
chairs,  at  $4..50,  $27.00;  1  green  fibre  rush  settee,  $23.00 

Had  the  above  work  been  for  repairs,  it  would  not  have  been  proper  to  debit  Real  Estate. 

June  24.     I  sold  for  cash  1  all  iron  bedstead,  $6.75;  1  Royal  cotton  mattress,  $4..50. ' 
Total,  $11.25. 

June  26.     I  bought  for  office  use,  giving  my  check  in  payment,  1  oak  desk,  $36.00. 

June  28.  I  sold  to  F.  J.  Lane  1  quartered  oak  veneered  dresser,  $39.75.  He  delivered 
to  me  in  payment  a  United  States  Express  money  order  for  $39.75  properly  endorsed. 

When  your  work  has  been  approved,  copy  it  carefully  in  your  journal  (or  rework  it, 
as  your  teacher  shall  direct).  The  journal  is  Book  A  of  Blanks  No.  1.  The  exercise 
will  require  three  pages  of  the  journal. 


PROMISSORY    NOTES  21 

Lesson  V 

PROMISSORY   NOTES 

Below  is  shown  a  printed  business  form  which  has  been  filled  out  in  writing.     Read 
every  wortl  of  it,  both  printed  and  written.     Then  answer  the  questions  which  follow: 


FORM    OF    A    PROMISSORY    NOTE 


7-0  0. 


^.Aca^.J^,  -^^^^  ^.  yM- 


"7?^'^  ^^v  ^^^^^ /7^'j/j^^^/^ yd/wiij^j^^tf/^ 


aUESTIONS 

Who  promises  to  pay? 

When  did  he  make  the  promise,  and  where  was  he  when  he  made  it? 

To  whom  did  he  make  the  promise? 

How  much  did  he  promise  to  pay? 

When  is  the  money  due?     How  is  this  date  determined? 

Where  does  the  promisor  agree  to  meet  the  promisee  to  pay  it? 

May  Davis  give  Stewart  Mdse.  worth  $200.00  instead  of  the  money? 

To  whom  is  the  above  a  note  for  money  receivable? 

To  whom  is  it  a  note  for  money  payable? 

Explanation.  The  words  "Value  received"  constitute  an  acknowledgment  that 
vduc  has  been  received  for  which  the  note  was  given.  It  is  not  necessary,  in  most  States, 
that  these  words  appear. 

Parties  to  a  Note.  There  are  two  parties,  originally,  to  a  note,  called  the  maker 
and  the  payee.  The  maker  is  the  person  who  signs  it  and  becomes  responsible  for  its 
jjayment.     He  is  the  payer.     The  payee  is  the  person  to  whom  the  note  is  payable. 

The  date  of  maturity  is  the  due  date.  This  must  be  fixed  definitely  and  usually  is 
so  fixed  by  its  dating  and  words  showing  how  many  days  or  months  after  that  date  it  is 
payable.     Notes  may  be  payable  "on  demand." 

The  prineipal  is  the  amount  due  as  written  in  the  note.  The  principal  is  sometimes 
referred  to  as  the  "face"  of  the  note.  The  amount  due  is  the  principal  plus  the  amount 
accrued  for  interest  up  to  the  date  of  pa^rment 


22 


JOURNALIZING 


A  note  may  be  transferred  by  the  payee  to  some  one  else.  This  transfer  must  be 
evidenced  by  endorsement.     The  person  owning  the  paper  at  any  time  is  called  the  holder. 

An  endorsement  is  the  signature  of  some  person  other  than  the  maker,  made  either 
for  the  purpose  of  guaranteeing  the  note  or  transferring  it,  usually  both.  The  endorse- 
ment is  usually  written  across  the  back  of  the  left  end  of  the  note  and  when  it  is  so  written 
it  means  that  the  person  signing  the  paper  transfers  it  to  some  one  else,  and  guarantees 
it.  Thus  the  payee  of  a  note  could  transfer  it  to  some  other  person  by  endorsing  it  as 
shown  in  the  following  illustration. 

ILLUSTRATION 


The  above  is  an  illustration  of  a  note  endorsed  in  full.  There  are  several  other  kinds 
of  endorsement.  Endorsement  in  blank  (the  signature  only)  is  very  common.  Endorse- 
ment in  full  is  better  for  the  endorsee  than  any  other  kind. 


Lesson  VI 
THE   NOTES    RECEIVABLE   ACCOUNT 

Payments  are  not  always  made  in  cash.  Sometimes  notes  are  given  instead  of 
money.     When  a  note  is  in  favor  of  the  business,  it  is  said  to  be  a  "note  receivable." 

One  of  the  problems  of  the  bookkeeper  is  to  determine  the  total  of  notes  receivable 
which  should  be  on  hand  at  any  time.  In  order  to  do  this  he  must  keep  a  record  of  notes 
receivable  received  and  disposed  of.  He  therefore  opens  an  account  in  the  ledger  headed 
Notes  Receivable. 

Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the  Illustration. 


THE  NOTES  RECEIVABLE  ACCOUNT 


23 


ILLUSTRATIVE    EXERCISE 

191— 

Sept.     1.  Received  W.  H.  Stedman's  note  for  $160.00.      • 

2.  Received  a  note  from  B.  V.  Giles  for  $225.00. 

3.  C.  D.  Norton  gave  me  his  note  for  $57.50  for  Mdse. 

12.     Disposed  of  B.  \.  Giles'  note  for  $225.00  by  selling  it  to  the  bank. 

14.     Geo.  H.  Rogers  gave  me  Richard    Roe's    note    for   $100.00    in    exchange 

for  Mdse. 
16.     W.  H.  Stedman  paid  me  $160.00  in  cash  and  I  gave  him  back  his  note. 

18.  C.  D.  Norton  paid  for  his  note  in  cash  and  I  returned  the  note  to  him. 

19.  Received  B.  H.  Patterson's  note  for  $160.40. 

No  notes  were  received  or  disposed  of  during  the  rest  of  September.     Find  the  lial- 
ance  of  notes  on  hand  Sept.  30. 


ILLUSTRATION 


y/ij^-Z^  L/p^^:^>^^i.^A22,^^£2^ 


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Explanation.  The  above  is  a  notes  receivable  account.  The  explanations  Dr. 
and  Cr.  are  not  written  above  the  left  and  right  sides,  respectively,  of  the  account,  because 
it  is  assumed  that  by  this  time  the  student  is  familiar  enough  with  the  form  of  an  account 
to  make  these  explanations  unnecessary. 

aUESTIONS 

Items  of  what  kind  are  entered  upon  the  debit  side  of  the  account? 

Items  of  what  kind  are  entered  upon  the  credit  side  of  the  account? 

What  does  the  total  of  the  debit  column  indicate? 

What  does  the  total  of  the  credit  column  indicate? 

What  does  the  difference  between  the  two  totals  indicate? 

How  can  I  tell  whether  the  result  of  the  account  is  correct  or  not? 

Which  side  of  the  account  can  never  be  the  larger? 

How  is  the  account  closed? 


24  JOUBNALIZING 

What  is  done  with  the  balance  after  closing?     Why? 

How  can  notes  receivable  come  into  my  possession  except  when  they  are   made  out  in  my  favor? 
How  can  I  dispose  of  a  note  receivable  without  waiting  for  it  to  be  paid  by  the  person  who  made  it? 
You  have  now  studied  the  cash,  Mdse.,  real  estate,  and  furniture  &  fixtures  accounts.     Which  one 
is  the  notes  receivable  account  like? 


Summary  of  the  Notes  Receivable  Account 

A  note  is  a  written  promise  to  pay  a  certain  sum  of  money  on  a  certain  day  to  a 
certain  person  or  his  order.  When  notes  are  in  favor  of  the  business,  they  are  notes 
receivable.     An  account  is  kepi  in  the  ledger  with  notes  receivable. 

Entries.  The  notes  receivable  account  contains  records  of  all  notes  receivable 
received  and  all  notes  receivable  disposed  of,  at  face  value. 

Rule.  Debit  the  notes  receivable  account  when  a  note  receivable  is  received  either 
from  the  person  who  made  it  or  from  some  other  person.  Credit  the  notes  receivaljle 
account  when  a  note  receivable  is  disposed  of  either  to  the  person  who  made  it  or  to  some 
other  person. 

Result.  The  difference  between  the  total  of  debits  and  the  total  of  credits  is  the 
balance  on  hand,  and  should  agree  with  the  notes  in  the  drawer  or  safe.  Items  always 
appear  on  the  debit  side  first.     The  debit  side  is  always  the  larger. 

Closing.     The  account  is  closed  just  as  you  learned  to  close  the  cash  account. 

Write  the  heading  Notes  Receivable  at  the  top  of  a  loose  sheet  of  ledger  paper  and 
make  the  entries  required  for  the  following  transactions: 


EXSBCISE  7 
191— 

July    1.     I  have  on  hand  notes  amounting  to  $1256.50. 

2.  I  bought  P.  A.  Quigley's  note.     Face  of  note,  $420.75. 

3.  I  sold  to  Jacob  Kern  Mdse.  invoicing  at  $120.60,  and  received  his  note 
in  payment. 

5.  One  of  the  notes  I  had  on  hand  July  1  was  paid  in  cash,  $250.00,  and  I 
returned  the  note  to  the  person  who  made  it.  (It  is  always  assumed 
that  a  note  is  returned  to  the  maker  when  it  is  paid.) 

6.  Andrew  J.  Hitchcock  gave  me  his  note  for  $50.00  which  he  owed  me. 
8.     Received  R.  H.  Lowden's  note  for  $116.75 

12.  P.  A.  Quigley  paid  his  note  in  cash,  $420.75. 

13.  Sold  Mdse.  to  H.  A.  Babcock  on  his  note,  $126.45. 

14.  Received  cash  from  Perry  &  Co.  for  their  note  due  this  day,  $76.95. 

16.     R.  L.  McGuire,  who  had  owed  me  $70.00  for  some  time,  gave  me  his  note 

to  cover  the  amount  due  me. 
18.     Jacob  Kern  gave  me  his  check  for  $120.60,  in  settlement  of  his  note  due 
today. 
No  other  notes  receivable  were  received  or  disposed  of  during  the  month.     Balance 
the  account,  dating  the  balancing  entry  July  31  and  bringing  down  the  balance  as  of 
Aug.  1. 


THE  NOTES  PAYABLE  ACCOUNT  25 

Lesson  VII 
THE    NOTES    PAYABLE   ACCOUNT 

When  a  person  issues  a  note  and  becomes  responsible  for  its  payment,  it  is  a  note 
payable,  as  far  as  that  person  is  concerned. 

The  terms  notes  receivable  and  notes  payable  define  themselves,  and  need  no  special 
explanation  except  to  remind  you  that  in  using  these  expressions  you  are  always  viewing 
the  notes  from  the  standpoint  of  the  proprietor  of  the  business — for  what  is  a  note  receiv- 
able to  him  will  be  a  note  payable  to  the  other  party  to  the   transaction,  and  vice  versa. 


ILLUSTRATIVE    EXERCISE 


191— 
Oct.      1. 

2. 

3. 

11. 

12. 

17. 
18. 
19. 


I  issued  my  note  for  $125.50. 

I  bought  Mdse.  invoicing  at  $160.00  and  gave  my  note  in  payment. 

I  mailed  a  promissory  note  to  Brown  &  Co.  for  the  amount  I  owed  them, 

$250.75. 

I  paid  $125.50  in  cash  for  the  note  issued  Oct.  1,  and  received  it  back, 

canceled. 

I  gave  Jacobs  &  Holmes  my  60-day  note  for  $200.00  due  them. 

I  redeemed  in  cash  the  note  issued  on  Oct.  2. 

I  bought  i\Idse.  on  my  15-day  note,  $136.75. 

I  paid  Brown  &  Co.  $250.75  in  cash  in  settlement  of  the  note  they  held 

against  me. 


ILLUSTRATION 


/((?-ti^  (y^Z^y^^l-fH!^ 


J/ 


y 


33  C 


xz. 


7-^ 


^^ 


2- 
3 
/Z 


■T^yCtiy 


v^ 


/ZJ-J-O 


r-76 


33C/'<S- 


Explanation.     The  above  is  an  illustration  of  the  Notes  Payable  account. 


26  JOURNALIZING 


QUESTIONS 


Items  of  what  kind  are  entered  upon  the  credit  side  of  the  account? 

Items  of  what  Icind  are  entered  upon  the  debit  side  of  the  account? 

What  does  the  total  of  the  credit  column  indicate? 

What  does  the  total  of  the  debit  column  indicate? 

Which  side  can  never  be  the  larger? 

What  does  the  difference  between  the  two  sides  indicate? 

How  is  the  account  closed? 

What  is  done  with  the  balance  after  closing?     Why? 

On  which  side  is  the  red  ink  lialance  entered? 

On  which  side  is  the  balance  brought  down  in  black  ink? 

What  is  the  advantage  of  balancing  the  account?     Can  you  think  of  any  disadvantage? 

Summary  of  the  Notes  Payable  Account 

A  record  of  notes  issued  and  redeemed  is  kept  in  the  ledger  under  the  heading  Notes 
Payable.  This  is  called  the  notes  payable  account.  It  is  the  exact  reverse  of  the  notes 
receivable  account,  in  which  are  kept  records  of  the  notes  received  and  disposed  of. 

Entries.  The  notes  payable  account  contains  records  of  all  notes  payable  issued 
and  all  notes  payable  redeemed. 

Rule.  Credit  the  notes  payable  account  when  we  issue  notes.  Debit  the  notes 
payable  account  when  we  redeem  notes  issued  by  us. 

Result.  The  result  is  a  balance  which  is  the  amount  of  our  notes  outstanding. 
Items  always  appear  on  the  credit  side  first.     The  credit  side  is  always  the  larger. 

Closing.  The  balance  is  entered  on  the  debit  side  in  red  ink  and  brought  down 
on  to  the  credit  side  in  black  ink. 

Prepare  Exercise  8  (an  account  headed  Notes  Payable)  on  the  same  page  with  Exercise 
7,  leaving  six  blank  lines  between  the  two.  When  both  have  been  approved,  copy  them 
(or  work  them  again,  as  your  teacher  shall  direct)  on  page  4  of  your  ledger  (Blanks  I, 
Book  B). 

EXERCISE  8 
191— 

Aug.     1.    Outstanding  notes  at  this  time  amounted  to  $1250.65. 

2.  Issued  my  15-day  note  to  W.  H.  Chapman  for  Mdse.,  S215.20. 

3.  Paid  cash  for  my  note  in  favor  of  W.  G.  Simpson,  $162.75. 

4.  E.  L.  Travers,  to  whom  I  owed  $100.00,  presented  a  note  for  the  amount, 
which  I  signed  at  his  request. 

5.  Borrowed  $500.00  from  the  First  National  Bank,  giving  my  60-day  note 
for  the  amount. 

6.  Redeemed  my  note  for  $240.70  which  matured  today,  in  cash. 

9.    Gave  Jerome  B.  Howard  my  30-day  note  for  $169.37,  to  cover  an  amount 
due  him. 

17.  Jesse  A.  Baldwin  presented  a  note  signed  by  me,  for  $215.20.  ■  This  note 
had  been  sold  to  him  by  W.  H.  Chapman.  After  making  certain  that  the 
note  was  properly  indorsed,  and  was  due  this  day,  I  paid  it  in  cash. 

18.  Bought  a  National  Cash  Register  for  $225.00  on  my  30-day  note. 
Close  the  account  as  of  Aug.  31. 


TRANSACTIONS    TO    BE    JOURNALIZED  27 

Lesson  VIII 
TRANSACTIONS    TO   BE   JOURNALIZED 

Before  proceeding  with  the  work  of  journaUzing  the  transactions  stated  below,  please 
consider  the  following  in  review. 

In  every  transaction  there  is  an  equal  exchange  of  values;  one  thing  is  received  (or 
costs  value),  and  another  thing  is  disposed  of  (or  produces  returns). 

Whenever  anything  is  received,  it  costs  value.  Whenever  anything  is  disposed  of, 
it  produces  returns.  A  little  reflection  will  show  you  that  the  expressions  "received" 
and  "cost  value"  can  be  used  interchangeably.  They  do  not  mean  the  same,  but  when 
one  is  true  the  other  is  also  true.  The  same  may  be  said  of  the  expressions  "  disposed  of" 
and  "produced  returns,"  because  when  a  thing  is  disposed  of  in  trade  it  produces  returns. 

In  journahzing  the  following,  apply  the  rule  for  journalizing  in  its  more  extended 
form,  thus: 

Debit  the  account  of  that  which  is  received  {or  costs  value).  Credit  the  account  of  that 
which  is  disposed  of  {or  produces  returns). 

The  accounts  with  which  you  are  now  familiar  are  the  cash,  merchandise,  real  estate, 
furniture  and  fixtures,  notes  receivable,  and  notes  payable  accounts. 

When  journalizing  notes  ask  yourself  in  each  case:  First,  was  it  a  note  receivable 
or  a  note  payable?    Second,  was  it  received  or  parted  with? 

EXERCISE  9 
191— 

Sept.  1.  I  bought  from  the  John  V.  Farwell  Co.,  for  cash,  4  Bagdad  Wilton  rugs, 
at  $22.50,  $90.00;  8  Bagdad  Wilton  rugs,  at  $37.50,  $300.00;  total,  $390.00. 

Sept.  2.  I  bought  from  Marshall  Field  &  Co.  5  Royal  Wilton  rugs,  at  $40.00, 
giving  them  in  payment  ray  non-interest-bearing  note  for  $200.00  due  in  twenty  days. 

Sept.  3.     I  sold  for  cash  3  Kordo  velvet  rugs,  at  $9.50,  $14.00,  and  $18.50  respectively. 

Sept.  5.  I  sold  to  Arthur  A.  Lyons  2  Saxony  Axminster  rugs,  at  $14.90  and  $16.90 
respectively.     He  gave  me  in  payment  his  15-day  note,  without  interest,  for  $31.80. 

Sept.  7.  I  purchased  from  the  Indiana  Carpet  Co.  100  sq.  yds.  Jap  matting,  at  18^^, 
$18.50;  250  sq.  yds.  H.  E.  China  matting,  at  12 1^,  $30.00;  total,  $48.50.  Gave  them  my 
20-day  note,  without  interest,  for  the  amount. 

Sept.  9.  J.  E.  Silver  &  Co.  invoiced  to  me  400  sq.  yds.  E  quality  printed  linoleum, 
at  25^,  $100.00.     I  gave  them  my  check  for  the  amount. 

Sept.  10.  The  Derby  Desk  Co.  delivered,  for  ofhce  use,  1  desk  and  stool,  $45.00; 
1  3-section  filing  case,  $32.50;  1  typewriter  desk  and  stool,  $27.50;  total,  $105.00.  I  gave 
them  $50.00  in  currency  and  my  check  for  $55.00. 

Sept.  11.  I  bought  from  the  Studebaker  Mfg.  Co.  an  auto-truck  for  delivery  pur- 
poses, $1250.00,  giving  in  exchange  my  60-day  note  bearing  interest  at  6%. 

Assume  that  you  are  keeping  an  Auto-truck  account  in  your  ledger.  This  account  is  kept  just  like 
the  real  estate  account. 

Sept.  11.  I  bought  the  garage  and  lot  located  at  7269  Parnell  Ave.,  paying  for  it 
by  check,  $1875.00. 

Sept.  14.  I  sold  to  S.  N.  Webster,  accepting  his  10-day  note  without  interest  in 
payment,  4  Smyrna  rugs,  at  $4.40,  $17.60;  40  yds.  body  Brussels  carpet,  at  $1.30,  $52.00; 
total,  $69.60. 


28  JOURNALIZING 

Sept.  15.  Received  J.  H.  Kimmons'  check  for  $82.95  in  payment  for  -3  seamless 
Wilton  rugs,  at  $27.65  each. 

Sept.  16.  R.  H.  Rennie  gave  me  his  note  for  $25.30  due  in  30  days,  at  6%  interest, 
for  1  Saxony  Axminster  rug. 

Sept.  20.  Arthur  A.  Lyons  paid  me  by  check  $31.80,  to  cover  the  amount  due  on 
his  note  of  Sept.  5. 

Sept.  22.  I  redeemed  my  note  of  Sept.  2  in  favor  of  Marshall  Field  &  Co.  for  $200.00, 
by  a  cash  payment. 

Sept.  22.  Sold  to  S.  R.  Lawton  40  sq.  yds.  E  quality  printed  linoleum  at  400,  $16.00, 
receiving  his  five-day  note  without  interest  in  payment. 

Sept.  24.  S.  N.  Webster  paid  his  note  due  today  in  cash.  This  was  the  note  I 
received  from  him  Sept.  14. 

Sept.  24.  I  bought  from  John  V.  Farwell  Co.,  on  my  30-(lay  note  without  interest, 
4  Bagdad  Wilton  rugs,  at  $15.00,  $21.25,  $24.50,  and  $27.50  respectively;  total  .$88.25. 

Sept.  27.  I  remitted  to  the  Indiana  Carpet  Co  $48.50  in  payment  for  my  note  dated 
Sept.  7  and  due  today. 

Sept.  27.  S.  R.  Lawton  paid  me  in  cash  the  amount  due  me  on  his  5-day  note  dated 
Sept.  22. 

Sept.  28.  I  sold  half  of  the  lot  at  7269  Parnell  Ave.  to  W.  E.  Lowe  for  $800.00, 
accepting  his  30-day  note  at  6%  interest  in  payment. 

Sept.  28.  I  bought  an  assorted  lot  of  window  fixtures  from  the  Central  Window 
Display  Co.  for  $125.00,  giving  in  exchange  my  60-day  note  at  5%. 

Sept.  29.  I  sold  to  Arthur  A.  Lyons  36  sq.  yds.  Jap  matting  at  30<t,  $10.80;  and 
36  sq.  yds,  H.  E,  China  matting,  at  20(S,  $7.20;  total,  $18.00.  He  gave  me  his  30-day 
note  at  6%. 

Sept.  30.  I  received  from  Marshall  Field  &  Co.  24  jute  rugs,  at  80^,  $19.20;  30  jute 
rugs,  at  $1.42^  $42.75;  total,  .|6r.95.     They  accepted  my  30-day  note,  at  6%,  in  payment. 

Lesson  IX 

ENTRIES   HAVING    MORE    THAN    ONE    DEBIT    AND    ONE    CREDIT 

Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the  Illustration. 

ILLUSTRATIVE    EXERCISE 

191— 

Sept.  1.  I  sold  to  Wm.  H.  Morrison  90  brls.  Winesap  Apples,  at  $5.00,  $450.00. 
In  exchange  he  gave  me  his  60-day  note  at  6%  for  $250.00  and  his  check  for  $200.00. 

Sept.  3.  I  received  $201.67  in  cash  from  Geo.  W.  Wilkins  in  settlement  of  his  60- 
day  note  due  today  for  $200.00,  and  interest  which  had  accrued  on  it  at  5%  amounting 
to  $1.67. 

Sept.  5.  I  bought  from  Jas.  King  the  store  building  and  lot  located  at  4726  Michigan 
Ave.  for  $7750.00,  and  paid  for  it  by  giving  my  90-day  note  at  6%  for  $5000.00,  merchan- 
dise worth  $250.00,  and  cash  for  the  balance. 

Sept.  6.  My  note  in  favor  of  H.  K.  Jones  fell  due  today.  The  face  of  the  note  was 
$100.00  and  interest  had  accrued  for  60  days  at  6%  amounting  to  $1.00.  I  delivered  in 
payment  1  Morris  chair  at  $35.50,  and  cash  for  the  balance. 


ENTRIES  HAVING  MORE  THAN  ONE  DEBIT  AND  ONE  CREDIT 


29 


ILLUSTRATION 


-OCd-^i^Z.-^t^^fO^Z.'^-C-^/,  /f/- 


9?^^:^^y^ 


^<«:k^^ 


-.i«^#l<^,  iPt^ /'S'-^,    /oi,-C^ '■■fi^t-d^  4 0-i;^-eiyY^'''^--'^^i^ "^^'^V" 


^-??^^ 


2-0/ 


77^<? 


/ 


67 


^so 


2.00. 
/ 


67 


30  JOURNALIZING 

After  carefully  examining  the  foregoing  transactions  and  tracing  them  to  the  illustra- 
tion as  suggested,  study  the  model,  especially  noting  the  exact  position  of  each  item  in 
each  entry.  Then,  covering  the  model,  write  the  transactions  independently  on  a  sheet 
of  loose  journal  paper,  afterward  comparing  your  work  in  every  detail  with  the    model. 


Summary 

Every  transaction  consists  of  an  equal  exchange  of  values,  but  there  may  be  more 
than  one  thing  received  or  more  than  one  thing  given.  There  may  be  two  or  more  debits, 
or  two  or  more  credits,  or  both.  The  debits  and  credits  must  exactly  equal  each  other, 
however,  in  every  transaction.  In  the  journal  entry,  the  debits  must  be  all  in  the  same 
relative  position,  and  the  credits  must  be  all  in  the  same  relative  position. 


THE   INTEREST    ACCOUNT 

Interest  is  the  use  of  money  for  which  consideration  is  paid.  When  one  party  uses 
money  belonging  to  another,  he  should  pay  for  that  use.  The  amount  of  the  payment 
for  interest  depends  upon  the  length  of  time  the  money  is  held  by  the  borrower  or  user 
and  the  rate  per  cent  agreed  upon.  When  one  party  makes  an  interest-bearing  note  in 
favor  of  another,  it  is  an  acknowledgment  that  he  is  holding  (receiving  the  use  of)  money 
belonging  to  that  other  and  an  agreement  to  pay  for  its  use  at  a  certain  rate.  The  rate 
is  customarily  stated  as  a  certain  per  cent  of  the  principal  per  annum. 


Illustrative  Exercise 

191— 

Sept.  1.     Received  the  use  of  money  for  which  use  I  paid  $5.76. 

2.  The  use  of  money  borrowed  from  John  Smith  cost  me  $2.35. 

3.  The  First  National  Bank  loaned  me  $1000.00.  I  paid  them  .$8.33  for  the 
use  of  this  money  for  sixty  days. 

4.  I  loaned  H.  E.  Hill  $200.00  and  the  loan  brought  me  returns  for  interest, 
$2.50. 

5.  John  Doe  borrowed  $500.00  from  me  and  paid  me  $4.50  for  the  use  of 
the  money. 

6.  I  paid  $7.50  for  interest  on  money  borrowed  from  H.  E.  Kessler. 

8.  John  Castle  paid  me  $303.50  for  his  note  due  this  day,  $300.00,  and  interest, 
$3.50  (consider  only  the  amount  collected  for  interest,  in  making  the  entry 
in  the  interest  account). 

9.  I  redeemed  my  note  in  favor  of  C.  H.  Harris,  $400.00,  on  which  $8.75  had 
accrued  for  interest,  by  giving  him  my  check  for  $408.75. 

■  No  other  transactions  involving  interest  took  place  during  the  month.  On  Sept. 
30,  $16.75  had  accrued  for  interest  on  my  money  held  by  others,  and  I  owed  $12.60  for 
interest  on  ziioney  belonging  to  others  and  being  used  by  me. 


THE    INTEREST    ACC^OUNT 


31 


ILLUSTRATION 


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Oz^ 


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/. 


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i  36 


i  73 
i  'if 

6,0 


M=A'M- 


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30 


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Explanation.     The  above  is  an  account  with    interest,  with    both    debit    and    credit 

inventories,  closed. 

UTJESTIONS 

On  which  side  are  costs  of  Mdse.  entered  in  a  Mdse.  account? 
On  which  side  are  entered  costs  of  interest  in  the  above  illustration? 
On  which  side  are  entered  returns  for  interest? 

On  which  side  are  entered  costs  which  have  accrued  but  are  not  yet  paid? 
On  which  side  are  entered  returns  which  have  accrued  but  are  not  yet  paid? 
What  does  the  lead  pencil  total  on  the  debit  side  show? 
What  does  the  first  lead  pencil  total  on  the  credit  side  show? 
What  does  the  second  lead  pencil  footing  on  the  credit  side  show? 

After  the  inventories  have  been  entered,  what  does  the  excess  of  the  debit  side  over  the  credit  side 
show?     Had  the  credit  side  been  the  larger,  what  result  would  have  been  shown? 
How  are  the  inventories  brought  down? 


What  are  these  called? 
What  are  these  called? 


Summary  of  the  Interest  Account 

Interest  is  the  use  of  money  for  which  consideration  is  paid.  When  I  receive  the 
use  of  Smith's  money  I  should  pay  for  that  use.  When  I  give  Smith  the  use  of  my  money 
he  should  pay  me  for  that  use.  When  I  receive  the  use  of  others'  money,  therefore, 
and  give  value  for  it,  interest  costs  me.  When  I  part  with  the  use  of  my  money,  and 
receive  value  in  exchange,  interest  produces  returns  to  me. 

Entries.  The  interest  account  contains  records  of  all  items  of  cost  of  our  use  of 
money  belonging  to  others,  and  all  returns  to  us  from  others  for  their  use  of  our  money. 
(Stated  more  briefly,  the  co&ts  and  returns  arising  from  interest.) 

Rule.  Debit  the  interest  account  when  interest  costs  us.  Credit  the  interest 
account  when  interest  produces  us  returns. 


32  JOURNALIZING 

Result.  When  all  amounts  due  for  interest  from  us  and  to  us  are  paid,  the  interest 
account  shows  a  loss  if  the  debit  side  be  larger,  or  a  gain,  if  the  credit  side  be  larger. 

Inventories.  Costs  for  interest  which  have  accrued  up  to  the  time  the  account  is 
closed,  but  have  not  yet  been  paid  or  otherwise  adjusted,  are  entered  upon  the  debit 
side  in  i-ed  ink  and  added  to  the  costs  which  have  been  actually  paid  or  otherwise 
adjusted.  Returns  for  interest  which  have  accrued  up  to  the  time  the  account  is  closed, 
but  have  not  yet  been  paid,  are  entered  on  the  credit  side  in  red  ink  and  added  to  the 
returns  which  have  been  actually  made. 

Closing.  The  loss  or  gain  is  entered  upon  the  smaller  side  in  red  ink,  and  the  account 
is  ruleil  and  footed.  The  inventories  are  brought  down,  each  being  entered  in  Ijlack  ink 
upon  the  side  opposite  that  on  which  it  was  entered  in  red. 


EXERCISE  10  - 

Open  an  interest  account  by  writing  the  heading  Interest  on  a  sheet  of  ledger  paper 
and  make  entries  in  this  account  for  the  transactions  following.  Do  not  attempt  to  jour- 
nalize.    Enter  the  interest  items  only  and  enter  them  direct  in  the  ledger  account. 

191— 

Oct.  1.  Received  $10.00  in  cash  from  L.  L.  Snell  for  interest  due  me  on  money 
borrowed. 

Oct.  4.     Paid  $6.50  to  the  First  National  Bank  for  interest  on  my  note  in  their  favor. 

Oct.  7.  I  held  a  note  against  S.  S.  Parkinson  for  $100.00  due  this  day.  Interest 
had  accrued  amounting  to  $1.60,  and  he  gave  me  his  check  for  $101.60  in  settlement. 
(Enter  the  item  of  interest  only.) 

Oct.  12.  The  Citizens  Bank  presented  a  note  signed  by  me  for  $250.00,  due  this 
day,  with  $2.67  interest  accrued.     I  paid  it  by  check. 

Oct.  16.  The  semi-annual  interest  on  a  mortgage  which  I  held  against  Fairview 
Farm  fell  due  and  was  paid  to  me  in  cash,  $45.00. 

Oct.  18.  I  held  a  note  against  Harold  E.  Smith  due  today  with  $7.50  interest  accrued. 
Smith  could  not  pay  the  note,  but  he  paid  me  $7.50  for  interest  and  secured  an  extension 
of  the  note. 

Oct.  20.  S.  T.  Herman  gave  me  his  check  for  $152.25,  for  his  note  due  today,  $150.00, 
and  interest,  $2.25. 

Oct.  24.  I  paid  E.  E.  Trotter  $263.00  in  cash  for  my  note  in  his  favor,  due  today, 
$257.50,  and  interest,  $5.50. 

Oct.  31.  Interest  accrued  on  my  money  being  used  by  others,  $23.50.  (Red  ink 
entry  of  inventory,  on  credit  side.) 

Oct.  31.  Interest  accrued  on  money  of  others  being  used  by  me,  $17.60.  (Red  ink 
entry  of  inventory,  on  debit  side.) 

Find  the  gain  or  loss  for  interest  for  October  and  enter  it  on  the  smaller  side  in  red 
ink.  Rule  the  account  and  foot  the  columns.  Bring  the  inventories  down  below  the 
double  rulings,  each  on  the  side  opposite  that  on  which  it  was  entered  in  red.  When 
your  work  has  been  approved,  copy  the  account  (or  work  it  again,  as  your  teacher  shall 
direct)  on  page  4  of  your  ledger,  leaving  four  blank  lines  below  the  notes  payable 
account. 


ACCOUNTS    WITH    PERSONS 

Lesson  X 

ACCOUNTS   WITH    PERSONS 

Trace  the  following  transactions  from  the  Illustrative  Exercise  to  the  Illustration. 

Illustrative  Exercise 

191— 

Sept. 
for  which 

Sept. 

Sept. 
S25.00. 

Sept. 

Sept. 

Sept. 

Sept. 


33 


1.  I  sold  B.  L.  Thompson,  3346  Indiana  Ave.,  Mdse.  invoicing  at  $47.50, 
he  did  not  pay  me  at  the  time. 

2.  I  sold  B.  L.  Thompson  on  account  a  bill  of  goods,  $23.76. 

3.  I  received  B.  L.  Thompson's  note  in  part  payment  of  what  he  owed  me, 

14.  Sold  B.  L.  Thompson  on  account  goods  invoicing  at  $17.75. 

15.  B.  L.  Thompson  paid  me  $20.00  in  cash. 

26.  B.  L.  Thompson  returned  Mdse.  which  I  had  sold  him,  $2.30. 

27.  Sold  Mdse.  to  B.  L.  Thompson  on  credit,  $12.50. 


illustration 


jj4^<: 


2J^. 


3. 

2/ 


Explanation.  The  above  is  an  account  with  a  person,*  or  personal  account.  When 
persons  get  something  of  value  from  us  without  making  settlement  at  the  time,  a  claim 
against  them  is  established  in  our  favor.  When  we  get  something  of  value  from  others 
without  making  settlement  at  the  time,  a  claim  is  established  against  us  in  their  favor. 
An  account  is  opened  with  each  person  against  whom  we  receive  such  claims  or  to  whom 
we  give  such  claims  against  us  and  the  amounts  of  these  claims  and  of  payments  made 
in  settlement  or  reduction  of  them  are  entered  in  the  account.  All  such  dealings  with 
persons  are  said  to  be  "on  account"  because  they  are  to  be  recorded  in  the  account  with 
the  person.  A  personal  account  should  always  be  headed  with  the  name  and  address 
of  the  person.     A  person  who  owes  us  is  our  debtor;  one  whom  we  owe  is  our  creditor. 

The  terms  debtor  and  creditor  apply  to  persons  only,  not  to  the  sides  of  an  account.  The  left  side 
of  an  account  is  the  debit  side,  and  the  right  side  is  the  credit  side. 

*The  word  "person"  as  used  throughout  this  lesson,  will  be  understood  to  mean  person,  firm,  or 
corporalion. 


34  JOURNALIZING 

Accounts  of  this  class  far  outnuniljer  all  other  accounts  in  the  ledger  of  an  ordinary 
concern  doing  a  credit  business. 

aXTBSTIONS 

With  what  person   does   the  above  account  show  that  I  have  had  business  deaUngs? 

What  is  his  address? 

Upon  which  side  was  the  entry  made  when  I  received  a  claim  against  him? 

Upon  which  side  was  the  entry  made  when  he  paid  me  and  thus  reduced  the  amount  of  my  claim? 

What  was  the  total  of  claims  against  B.  L.  Thompson  received  by  me  during  September? 

What  was  the  total  of  B.  L.  Thompson's  payments  in  reduction  of  my  claims  against  him? 

How  much  does  he  still  owe  me? 

Note.  The  foregoing  illustration  is  an  account  with  a  customer.  The  debit  entries  or  claims  against 
him  (charges)  amount  to  more  than  do  the  credit  entries,  which  represent  his  jjaymcnts.  An  account 
with  a  person  from  whom  I  buy  would  probably  show  a  larger  credit  side  than  debit  side  and  its  balance 
would  be  payable  rather  than  receivable. 

Summary  of  Personal  Accounts 

Entries.  Claims  against  others  on  account,  claims  of  others  against  us,  and  pay- 
ments by  or  to  us  on  account  are  entered  in  personal  accounts. 

Rule.  Debit  the  account  of  a  person  when  we  receive  a  claim  against  that  person 
on  account;  credit  the  account  when  he  pays.  Credit  the  account  of  a  person  when  we 
give  that  person  a  claim  against  us  on  account;  debit  the  account  when  we  pay  him. 

Result.  The  difference  between  the  two  sides  shows  whether  the  person  owes  us 
or  we  owe  him,  and  how  much.  If  the  debit  side  be  the  larger  he  owes  us;  if  the  credit 
side  be  the  larger,  we  owe  him.  A  neat  lead  pencil  footing  is  placed  close  beneath  the 
last  item  in  each  column.  The  difference  between  these  two  footings  is  then  ascertained 
and  written  in  small  lead  pencil  figures  at  the  left  of  the  larger  footing,  just  outside  of 
the  money  column. 

Closing.  Personal  accounts  are  not  customarily  ruled,  except  when  they  are  paid  in  full 
and  the  two  sides  are  equal;   in  forwarding,  the  better  plan  is  to  forward  the  balance  only. 

Note.  It  will  be  observed  that  the  rule  for  personal  accounts  is  not  different  from  every  other 
rule  you  have  learned;  nor  will  you  ever  learn  any  different  rule.  The  rule  "Debit  what  is  received; 
credit  what  is  disposed  of"  is  of  universal  application.  In  the  case  of  a  personal  account,  it  is  apparent 
that  we  are  keeping  records  of  claims  against  and  in  favor  of  persons,  and  that  this  record  is  debited  when 
a  claim  is  received  and  credited  when  a  claim  is  disposed  of.  It  follows  naturally  that  when  payments 
are  made  in  reduction  of  claims  the  entries  are  made  on  the  side  opposite  that  on  which  the  claim  was 
entered;  so  we  credit  the  accounts  of  persons  who  make  payments  on  account  and  debit  the  accounts  of 
persons  to  whom  we  make  payments  on  account. 

Note  Accounts  with  persons  to  whom  we  sell  can  be  compared  to  the  account  with  notes  receivable, 
and  accounts  with  persons  from  whom  we  buy  can  be  compared  to  notes  payable.  In  the  case  of  notes, 
the  promise  to  pay  is  always  written,  whereas  in  the  case  of  personal  accounts  the  promise  to  pay  is  either 
a  verbal  promise  or  an  implied  promise,  but  the  accounts  are  handled  in  the  same  way.  One  form  of 
dissimilarity  is  that  a  personal  account  may  contain  items  both  payable  and  receivable,  so  that  some- 
times the  balance  is  on  the  opposite  side  from  what  would  ordinarily  be  expected.  Sometimes  two 
accounts  are  kept  with  the  same  person,  one  account  showing  what  we  have  bought  from  him,  and 
payments  thereon;  the  other  showing  what  he  has  bought  from  us,  and  payments  thereon. 

Open  accounts  with  McNeil  &  Co.,  569  S.  Water  St.,  L.  W.  Sherman,  4827  Yale  Ave., 
and  R.  L.  Peterson,  5132  Princeton  Ave.  Give  each  account  one-third  of  a  page.  Write 
the  names  in  a  bold,  strong  hand;  the  addresses  should  be  written  neatly  and  legibly, 
but  very  small,  on  the  next  line.  Do  not  attempt  to  journalize.  Simply  enter  the  debits 
and  credits  of  personal  accounts  directly  into  the  accounts. 


191- 


THE    proprietor's    ACCOUNT  35 

SXSBCISE  11 


Nov.     1.  Bought  Mdse.  from  McNeil  &  Co.  on  account,  $276.28. 

2.  Sold  Mdse.  to  L.  W.  Sherman,  on  account,  $10.52. 

3.  Sold  Mdse.  to  R.  L.  Peterson,  on  account,  18.93. 

4.  Purchased  from  McNeil  &  Co.,  on  credit,  Mdse.  invoicing  at  $153.65. 

5.  Sold  on  credit  to  L.  W.  Sherman,  goods  billed  at  $22.50. 

6.  Sold  a  bill  of  goods  on  credit  to  R.  L.  Peterson,  invoicing  at  $12.75. 

8.  Paid  McNeil  &  Co.  cash  on  account,  $100.00. 

9.  Received  from  L.  W.  Sherman  cash  on  account,  $15.00. 

10.  Received  from  R.  L.  Peterson  cash  on  account,  $10.00. 

11.  McNeil  &  Co.  billed  to  me  Mdse.  on  credit,  $87.50. 

13.  L.  W.  Sherman  bought  Mdse.  on  account,  $5.67. 

14.  R.  L.  Peterson  purchased  Mdse.  from  me  on  account,  $7.87. 
14.  I  returned  Mdse.  to  McNeil  &  Co.,  $12.60. 

16.  L.  W.  Sherman  returned  Mdse.  to  me,  $2.22. 

17.  R.  L.  Peterson  gave  me  his  note,  $15.00. 

18.  I  gave  McNeil  &  Co.  my  note  for  $100.00. 

19.  Sold  L.  W.  Sherman  Mdse.  on  account,  $11.34. 

20.  R.  L.  Peterson  bought  Mdse.  from  me  on  credit,  $4.86. 
22.  I  purchased  Mdse.  from  McNeil  &  Co.,  on  account,  $23.65. 

22.  R.  L.  Peterson  paid  me  cash  in  full  of  account,  $ . 

After  making  the  entry  rule  and  foot  the  account. 

23.  I  paid  McNeil  &  Co.  cash  on  account,  $50.00. 

24.  I  collected  cash  from  L.  W.  Sherman,  $15.00. 

25.  Sold  to  R.  L.  Peterson  Mdse.  billed  at  $15.62. 

26.  Paid  cash  to  McNeil  &  Co.  to  balance  our  account  with  them,  $ . 

After  making  the  entry,  rule  and  foot  the  account. 

28.  Sold  to  L.  W.  Sherman  Mdse.  billed  at  $6.73. 

Show  the  amount  due  from  L.  W.  Sherman,  making  neat  lead  pencil  figures  in  the 
wide  column  on  the  debit  side,  as  shown  in  the  illustration  on  page  33. 

THE  PROPRIETOR'S  ACCOUNT 

The  proprietor's  account  is  the  account  in  which  are  shown  the  investments  in  the 
business  made  by  the  proprietor,  and  the  withdrawals  from  the  business  made  by  him. 
The  net  gain  of  the  business,  as  periodically  determined,  is  usually  allowed  to  remain  in 
the  business  as  an  additional  investment;  if  a  net  loss  be  shown  instead  of  a  net  gain,  the 
net  loss  is  treated  as  a  withdrawal. 

Entries.  These  are  the  investments  made  by  the  proprietor  and  his  withdrawals, 
as  described  above. 

Rule.  Debit  the  account  for  amounts  invested  by  the  proprietor.  Credit  it  for 
his  withdrawals. 

Result.  The  difference  between  the  two  sides  of  the  account  shows  the  amount 
of  the  proprietor's  net  investment  (the  net  capital  of  the  business)  if  the  credit  side  be 
the  larger;  if  the  debit  side  be  the  larger,  a  net  insolvency  is  shown. 

Closing.  The  proprietor's  account  is  closed  with  a  balance,  at  the  time  of  closing 
other  ledger  accounts. 


36 


JOURNALIZING 


Note. — The  business  itself  is  the  property  of  the  proprietor.  Hence  it  cannot  be  said,  in  a  logical 
sense,  that  the  business  owes  the  proprietor  any  tiling.  In  a  strictly  .formal  bookkeeping  sense,  however, 
the  books  appear  to  show  that  the  business  owes  the  proprietor  the  balance  of  the  proprietor's  account. 
This  is  sometimes  referred  to  as  an  "inside"  liability.  The  proprietor  cannot  be  sure  of  that  balance,  how- 
ever, until  all  debts  to  outside  creditors  are  paid,  and  even  then  the  business  would  not  owe  it  to  him, 
because  he  owns  the  business,  and  therefore  has  the  assets  of  the  business  in  his  own  possession.  The 
resemblance  between  the  proprietor's  account  and  an  account  with  a  creditor  is  close  enough,  however, 
to  permit  of  a  comparison  of  the  rules  for  debit  and  credit,  thus: 

Credit  the  account  of  the    {  -^^Hor^^  j  f„,   ^^^,  ^^  |  .gives^  j 

Debit  the  account  of  the    {  ^n^^.r  }  ^^ -^-*   1  heTtL^a'vs  i 

The  resemblance  above  noted  is  so  evident  that  it  is  not  considered  necessary  to  give  an  illustration 
of  the  proprietor's  account  here.  Sufficient  instruction  has  been  given  to  enable  the  student  to  make 
the  entries  required  before  he  reaches  page  68,  where  there  is  shown  a  full  form  of  the  proprietor's  account. 


THE    EXPENSE   ACCOUNT 

Items  of  expenditure  for  the  conduct  of  the  business*  are  called  expense.     This  includes 
such  items  as  rent,  coal,  salaries  and  wages,  non-productive   labor,  and  all  smaller  inci- 
dental expenses.     An  expense  account  is  usually  kept  in  the  ledger. 
Illustrative  Exercise 
191— 

Paid  rent  for  September  in  cash,  $75.00. 
Bought  postage  stamps  for  cash,  $20.00. 

Bought  from  Smith  &  Co.,  on  account,  4  tons  coal  at  $3.60,  $14.40. 
Paid  the  clerk's  salary  in  cash,  $14.00. 
Sold  for  cash  200  20  stamps. 
Paid  the  clerk's  salary  in  cash,  $14.00. 
Inventories  Sept.  30.     Coal  on  hand,  2  tons  at  $3  60,  $7.20.     Salary  due  clerk,  $30.00 

illustration 


Sept. 

1. 

Sept. 

2. 

Sept. 

4. 

Sept. 

6. 

Sept. 

8. 

Sept. 

13. 

fe 


CM/ 


l/' 


4^-^^ 


7^ 

/ 

/^ 

.J-a. 


/  Cy 


7^ 


OO: 


^^J^f'2.'2/-e^'n^en^ 


^ 


7 


/C? 


lAo 


*  "Expenditure  for  the  conduct  of  the  business"  must  be  understood  as  exclusive  of  outlay  for 
trading  and  investment  items.  This  does  not  include  interest,  however,  or  any  other  class  of  expenditure 
for  which  an  independent  account  is  kept.  Items  of  tangible  property  are  not  usually  considered 
expense  unless  they  are  consumed  in  the  using. 


REVIEW    EXERCISES 


37 


Entries.  Items  of  cost  incurred  in  running  the  business  and  rebates  or  returns 
from  such  items,  are  entered  in  the  expense  account. 

Rule.  Debit  the  expense  account  for  all  items  of  cost  incurred  in  running  the 
business;  credit  the  expense  account  for  rebates  or  returns  from  such  items,  if  any  (as 
when  postage  stamps,  the  cost  of  which  has  been  charged  to  expense,  are  sold  for  cash). 

Inventories.  Anything  remaining  on  hand  at  the  time  of  closing  the  account 
which  has  been  charged  to  expense  (e.  g.,  coal,  postage  stamps,  floor  oil,  etc.),  must  be 
entered  as  an  inventory  on  the  credit  side  in  red  ink  before  closing.  Any  obligations 
for  expenses  which  have  accrued  but  have  not  yet  been  met,  such  as  clerks'  wages 
or  salaries  earned  and  unpaid,  must  be  entered  as  an  inventory  on  the  debit  side  before 
closing. 

Result.  When  the  account  contains  none  but  debit  items,  the  total  of  the  debit 
side  shows  the  cost  of  expense  for  the  period  covered  by  the  account.  If  there  are  any 
credit  items  these  must  be  deducte^l. 

Closing.  The  account  closes  with  a  loss.  Inventories  must  be  brought  down  in 
red  ink,  in  each  case  onto  the  side  opposite  that  on  which  it  was  entered  in  red. 


Lesson  XI 

EXEBCISS  12 

REVIEW    EXERCISES    IN    JOURNALIZING 

Journalize  the  following  transactions,  beginning  on  a  new  page  of  the  journal. 
191— 

Paid  cash  for  December  rent,  .$75.00. 

Bought  for  cash  12  brls.  Washburn-Crosby  Superlative  flour,  at  $4.50,  $54.00. 

Paid  the  bookkeeper's  salary  for  the  week  in  cash,  $12.50. 

Sold  to  J.  W.  Swinton  on  his  20-day  note  at  6%,  225  bu.  oats,  No   2  white, 

at  32^  a  bushel,  $72.00. 

Sold  to  W.  S.  Rankin,  383  La  Salle  St.,  on  account,  4  brls.  Washburn- 
Crosby  Superlative  flour,  at  $5.60,  $22.40. 
'UTien  a  personal  account  is  opened,  the  person's  address  must  appear  in  the  first  entry  that  is  made, 
as  shown  in  the  illustration  herewith. 

ILLU.STRATION 


Dec. 

1. 

Dec. 

2. 

Dec. 

3. 

Dec. 

5. 

Dec.    6. 


^.^U^. 


'/^J-^. 


■3^jJ^^zJ3faJ£^jdA 


a^ 


XX 


i.2. 


Dec.    6.     Bought  from  B.  F.  Harman  the  building  and  lot  located  at  1231  State  St. 
for  $12,000.00,  giving  in  payment  our  check  for  $7000.00  and  our  15-day 
note  at  6%  for  $5,000.00. 
6.     Sold  for  cash  75  bu.  No.  3  yellow  corn,  at  49  (^,  $36.75. 


Dec. 


38  JOURNALIZING 

Dec.    7,     A.  J.  Brock,  4265  N.  Robey  St.,  invoiced  to  us,  terms  cash  10  days,*  300 

bu.  wheat,  at  $1.02,  $306.00. 
Dec.    8.     Sold  to  H.  B.  Pitton   100  bu.   wheat,   at  $1.07A,   $107.50,   receiving   his 

check  in  payment. 
Dec.  10.     Gave  the  bookkeeper  a  check  for  his  salary,  $12.50. 
Dec.  12.     B.  F.  Wylie,  7647  Peoria  St.,  ordered  by  telephone  50  bu.  No.  3  yellow 

corn,  at  56^.     We  delivered  this  to  him  and  charged  the  amount  of  the 

bill  to  his  account. 
Dec.  13.     Bought  for  cash  400  bu.  wheat,  at  95(t,  $380.00. 

Dec.  13.     Paid  the  drayman  $12.50  for  deliveries  made  for  us  during  November. 
Dec.  16.     W.  S.  Rankin  gave  us  his  note  for  $22.40  to  cover  his  bill  of  Dec.  6.     The 

note  was  a  30-day  note  at  6%,  and  was  dated  Dec.  6. 
Dec.  17.     In  accordance  with  the  terms  of  our  agreement  with  A.  J.  Brock  we  gave 

him  our  check  for  the  amount  due  on  his  bill  of  Dec.  7. 
Dec.  18.     Paid  the  bookkeeper's  salary,  $12.50,  giving  him  $2.50  in  cash  and  our 

check  for  $10.00. 
Dec.  20.     Sold  100  bu.  oats,  No.  2  white,  to  C.  J.  Andrews,  at  320.     He  gave  us  in 

payment  his  60-day  note  at  5%,  for  $32.00. 
Dec.  20.     Bought  from  Farson  and  Son  on  our  60-day  note  without  interest  500 

bu.  corn,  No.  4  white,  at  iUi,  $222.50. 
Dec.  21.     Our  15-day  note  dated  Dec.  6  fell  due  this  day,  and  we  paid  for  the  note, 

$5000.00,  and  interest  accrued  on  it  for  15  days  at  6%,  $12.50,  by  giving 

our  check  for  $5012.50. 
Dec.  24.     B.  F.  Wylie  claimed  that  part  of  the  corn  we  sold  him  on  Dec.   12  was 

not  up  to  grade,  and  returned  10  bu.,  for  which  we  gave  him  credit  at  the 

purchase  price,  56^*  (Dr.  Mdse.  $5.60;  Cr.  B.  F.  Wylie,  $5.60). 
Dec.  24.     Saturday  the  25th  being  a  holiday,  we  paid  the  bookkeeper's  salary  tonight 

in  cash. 
Dec.  27.     The  25th  being  a  holiday,  and  the  next  day  being  Sunday,  J.  W.  Swinton's 

20-day  note  of  Dec.  5  was  not  paid  until  the  27th.     He  gave  us  his  check 

to  cover  the  note  for  $72.00,  and  interest  at  6%  for  22  days,  260.     Total 

of  check,  $72.26. 
Dec.  27.     Borrowed  $1000.00  from  the  Second    National    Bank  on  our  note  for  30 

days  at  6%.     As  customary  in  such  cases  the  bank  deducted  the  sum  due 

for  interest,  $5.00,  in  advance,  paying  us  $995.00  in  cash. 
Dec.  28.     Sold  to  T.  J.  Hart  on  his  30-day   note  without  interest,    100  bu.   wheat 

at  $1.09,  $109.00. 
Dec.  29.     Bought  from  Carson,  Pirie,  Scott  &  Co.,  cor.  Adams  and  Market  Sts.,  for 

cash,   1   No.   XX98  display  case,   oak,   for  $4.25. 
Dec.  30.     Discounted  at  6%  our  60-day  note  for  $222.50  in  favor  of  Farson  and  Son 

dated  Dec.  20.     This  means  that  we  paid  it  50  days  before  it  was  due  in 

order  to  secure  a  discount.     Farson  and  Son  allowed  us  to  deduct  for  50 

days'  interest  at  6%,  $1.85,  paying  them  $220.65  in  cash. 


*This  means  he  allowed  us  ten  days  in  which  to  pay  the  bill. 


REVIEW    EXERCISES  39 

Dec.  31.     T.  J.  Hart  discounted  at  6%  his  30-day  note  for  $109.00  in  our  favor  dated 

Dec.  28.     This  means  that  he  paid  it  27  days  before  it  was  due,  in  order 

to  secure  a  discount.     We  allowed  him  to  deduct  for  27  days'  interest  at 

6%,  $.49,  paying  us  $108.51  in  cash. 

Journalize  the  transactions  for  June  given  below,  which  assume  the  following  accounts 

to  be  kept  in  P.  S.  Spangler's  ledger:    Cash,  Mdse.,  Real  Estate,  Furniture  &  Fixtures, 

Interest,  Expense,  Notes  Receivable,  Notes  Payable,  personal  accounts,  P.  S.  Spangler- 

Proprietor. 

^g^ EXERCISE  13 

June  1.  P.  S.  Spangler  has  this  day  invested  in  business  cash,  $12500.00  (Debit 
Cash;  credit  P.  S.  Spangler-Proprietor). 

June  1.  Bought  from  R.  E.  Morris  the  retail  gi-ocery  business  located  at  2113  Broad 
St.,  Your  City,  paying  in  cash  for  the  following  properties:  Mdse.,  $3750.00;  building  and 
lot,  .$6500.00;  store  furniture  and  fixtures,  $550.00;  and  a  30-day  note  for  $200.00  signed 
by  G.  C.  Claybaugh,  dated  May  9,  on  which  interest  had  accrued  at  6%  amounting  to 
77(*.  (The  explanation  should  make  a  complete  statement  of  what  took  place  and  no 
important  detail  should  be  omitted.) 

June  2.  Bought  from  H.  T.  Jett,  2738  Topeka  St.,  on  account,  100  doz.  cans  No. 
2  Telephone  peas,  at  $1.10,  $110.00. 

June  3.  Purchased  from  F.  E.  Lakey,  1816  Michigan  Ave.,  on  our  10-day  note  at 
6%,  144  doz.  cans  No.  2  extra  standard  apricots,  at  $1.50,  $216.00. 

June  4.  Sold  to  H.  S.  Clay,  1312  Lexington  St.,  on  account,  90  lbs.  California  prunes, 
at  17^,  $15.30;  3  boxes  Muscatel  raisins,  150  lbs.  at  90,  $13.50;  total,  $28.80. 

June  6.  Bought  from  the  Remington  Typewriter  Co.,  154  Wabash  Ave.,  on  our 
15-day  note  at  6%,  1  No.  10  machine,  $105.00;  1  8-drawer  typewriter  desk,  $15.00;  1 
stenographer's  chair,  $6.75;  total,  $126.75. 

June  6.     Paid  the  clerk's  salary  for  the  week  ending  today,  in  cash,  $15.00. 

June  8.     G.  C.  Claybaugh  paid  cash  for  his  note  due  today,  $200.00,  and  interest,  $1.00. 

June  9.  Bought  from  B.  J.  Still  &  Bros.,  1625  Rolfe  BouL,  on  account,  66  lbs.  Santos 
coffee,  at  20^,  $13.20;  150  lbs.  finest  Mexican  coffee,  at  180,  $27.00;  total,  $40.20. 

June  10.  Sold  to  Geo.  H.  Zinnel,  1927  Nicolet  Ave.,  50  lbs.  extra  choice  Formosa 
tea,  at  700,  $35.00.     Received  in  exchange  his  15-day  note,  at  6%. 

June  11.  Sold  to  C.  C.  Parlin,  2536  Wausau  Ave.,  on  account,  70  lbs.  fine  Japan 
tea,  basket  fired,  at  400,  $28.00. 

June  12.     Paid  H.  T.  Jett  in  cash  the  amount  of  his  invoice  of  June  2,  $110.00. 

June  13.  Paid  in  cash  for  our  note  in  favor  of  F.  E.  Lakey,  $216.00,  and  interest 
for  10  days,  $.36. 

June  13.     H.  S.  Clay  paid  cash  to  settle  our  bill  of  June  4,  $28.80. 

June  13.     Paid  the  clerk's  salary  for  the  week  in  cash,  $15.00. 

June  15.     Paid  the  scrubwoman  cash  for  services,  $3.50. 

June  16.     C.  C.  Parlin  paid  us  $10.00  in  cash  to  apply  on  account. 

June  18.  Sold  to  H.  S.  Clay  on  account,  9  doz.  bottles  Mammoth  olives,  at  $7.50, 
$67.50. 

June  19.  Sold  to  Geo.  H.  Zinnel,  1927  Nicolet  Ave.,  on  account,  90  lbs.  imported 
Westphalia  ham,  at  350,  $31.50;  4  boxes  Kingsford's  Silver  Gloss  starch,  at  $4.75,  $19.00; 
total,  $50.50. 


40 


JOURNALIZING 


June  20.     Paid  the  clerk's  salary  in  cash  as  before. 

June  21.     Received  from  tt.  S.  Clay  on  account  his  60-day  note,  at  6%,  for  $50.00. 

June  21.  Paid  by  check  our  note  in  favor  of  the  Remington  Typewriter  Co.,  $126.75, 
and  interest  for  15  days  at  6%,  $.32. 

June  22.     Sold  to  C.  C.  Parhn  on  account  3  boxes  Fels  Naphtha  soap,  at  $4.25,  $12.75. 

June  24.  Geo.  H.  Zinnel  paid  in  cash  his  note  in  our  favor  dated  June  10,  $35.00, 
and  interest  for  14  days  at  6%,  $.08. 

June  24.     Petty  (small)  sales  of  Mdse.  for  cash  amounted  to  $69.43. 

June  24.     P.  S.  Spangler,  the  proprietor,  withdrew  cash  for  private  use,  $25.00. 

June  26.  Received  $18.00  in  cash  from  C.  C.  Parlin  for  the  balance  due  on  the 
invoice  sold  to  him  June  11. 

June  27.     Paid  the  clerk's  salary  in  cash  as  before. 

June  27.     Received  $12.50  cash  from  Geo.  H.  Zinnel  on  account. 

June  29.  Sold  to  H.  S.  Clay,  on  account,  8  doz.  cans  clam  chowder  (quarts),  at  $3.00, 
$24.00;  6  doz.  cans  chicken  gumbo  soup  (quarts),  at  $3.25,  $19.50;  total,  $43.50. 

June  30.     Bought  a  straight-backed  chair  for  the  stenographer,  for  cash,  $2.25. 

June  30.     Sold  the  stenographer's  old  chair  at  second  hand  for  $4.25  cash. 

INVOICES 

An  invoice  is  a  written  list  of  the  items  of  some  particular  sale  of  goods,  showing  the 
quantity,  name,  price,  and  amount  of  each  item  sold,  and  the  total  of  the  sale.     It  is 


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DEFINITIONS    AND    PRINCIPLES  41 

prepared  at  the  time  of  the  sale  or  shipment  and  is  sulamitted  to  the  customer  as  a  memo- 
raiulum  of  the  sale.  Invoices  are  usually  prepared  on  printed  forms,  the  headings  of 
which  contain  the  name  and  address  of  the  seller,  with  blank  spaces  in  which  the  name 
and  address  of  the  buyer,  the  date  of  the  sale,  and  perhaps  other  important  data,  may 
be  inserted. 

The  student  should  be  careful  not  to  confuse  invoices  with  statements.  Statements 
of  account  are  made  periodically  (usually  monthly)  to  customers,  and  a  statement  may 
cover  a  number  of  invoices.  Only  the  total  amount  and  date  of  each  invoice  appears 
on  the  statement. 

Avoid  indiscriminate  use  of  the  word  "bill."  This  is  a  word  which  is  loosely  used 
to  mean  an  invoice,  a  statement,  a  dun,  a  piece  of  currency,  a  bill  of  exchange,  or  a  pro- 
posed legislative  enactment.  Because  it  has  many  meanings,  the  word  "bill"  should  be 
avoided  and  the  more  specific  word  used  whenever  possible.  Sometimes,  as  when  a 
charge  for  services  rendered  is  submitted  in  writing,  the  word  "bill"  seems  to  be  the 
only  one  which  can  be  used. 


Lesson  XII 
DEFINITIONS  AND  PRINCIPLES 

Review 

To  THE  Student:  It  is  assumed  that  you  have  now  an  understanding  of  the  nature  of  an  account 
and  of  the  rule  of  debit  and  credit.  An  intelligent  grasp  of  these  two  fundamental  things  must  precede 
any  comprehensive  view  of  double  entry  bookkeeping.  You  are  now  ready  to  undertake  the  study  of 
the  definitions  and  principles  which  follow,  as  you  can  now  read  them  with  understanding.  Learn  them 
thoroughly.  The  success  of  your  work  depends  largely  upon  your  early  mastery  of  the  definitions  and 
principles  here  laid  down.  If  you  learn  them  well,  you  will  get  a  broad  grasp  of  the  entire  subject  of 
bookkeeping  that  will  make  your  future  work  doubly  effective,  and  you  will  get  from  it  the  satisfaction 
and  pleasure  that  always  accompany  work  well  understood  and  well  done. 

A  Business  Transaction  is  a  single  exchange  or  trade. 

Money  is  the  medium  of  exchange  in  business  transactions.  That  is,  things  are 
exchanged  on  the  basis  of  their  values  expressed  in  terms  of  money. 

A  thing  has  value  if  its  possession  is  a  benefit  or  convenience  to  the  party  receiving 
it  (or  if  a  loss  or  inconvenience  is  occasioned  to  the  party  giving  it)  which  can  be  expressed 
in  terms  of  money. 

Things  having  value  may  be:  (1)  cash;  (2)  property;  (.3)  claims;  (4)  services;  (.5) 
uses  or  privileges. 

In  every  transaction  there  must  be  an  equal  exchange.  It  takes  two  to  make  a  bargain 
and  without  agreement  as  to  equality  of  values  there  would  be  no  trade.  (The  profit 
in  business  arises  from  the  fact  that  we  consider  the  value  of  a  thing  sold  as  greater  than 
the  value  of  the  same  thing  when  it  was  bought.) 

Transactions  are  recorded  in  bookkeeping  at  the  values  agreed  upon  between  the 
parties  trading 

Bookkeeping  is  the  science  and  art  of  keeping  records  of  business  transactions  and 
the  accounts  arising  from  them. 


42  JOUHNALIZING 

These  records  may  be  kept  in  bound  books,  or  they  may  be  kept  on  loose  sheets  or  cards  and  filed. 
For  the  i)resent,  assume  that  they  are  kept  in  bound  books. 

A  Set  of  Books  includes  all  the  books  in  which  the  transactions  of  a  certain  business 
are  recorded.     The  person  who  makes  these  records  is  called  a  bookkeeper. 

The  kind  and  number  of  books  kept  depends  upon  the  nature  and  extent  of  the  business  and  u])on 
what  the  proprietor  wishes  to  know  about  the  business. 

The  terms  accmmtant  and  bookkeeper,  while  often  applicable  to  the  same  person,  convey  different  mean- 
ings. A  bookkeeper  is  one  who  keeps  a  set  of  books,  making  the  entries,  posting,  taking  trial  balances 
and  preparing  statements.  He  may  understand  the  principles  of  the  science  of  bookkeeping  or  he  may 
do  his  work  by  rote.  An  accountant  is  one  thoroughly  versed  in  the  science  of  accounts, .  capable  of 
analyzing  statements,  devising  systems,  auditing  the  bookkeeper's  work;  his  knowledge  is  not  limited  to 
but  one  system.  In  general,  his  sphere  may  be  said  to  begin  where  that  of  the  bookkeeper  ends.  The 
bookkeeper  is  the  workman.  The  accountant  is  the  master  of  the  science,  under  whose  direction,  directly 
or  indirectly,  the  bookkee|)er  labors. 

Kinds  of  Books.  In  general,  there  are  three  kinds  of  books,  (a)  Books  of  original 
entry,  (b)  The  bonk  of  final  entry,  (c)  Auxiliary  books. 

Books  of  Original  Entry  are  those  in  which  transactions  are  recortled  at  the  time 
of  their  occurrence.     Of  this  kind  is  the  journal. 

Ledger.  The  book  of  final  entry  is  the  ledger.  This  contains  the  accounts  arising 
from  the  transactions  as  recorded  in  the  journal  and  other  books  of  original  entry.  You 
will  learn  later  how  to  transfer  these  entries  from  the  journal  to  the  ledger. 

Auxiliary  Books  are  books  of  memorandum.  The  facts  kept  in  them  are  often 
important  and  always  interesting,  but  they  are  not  an  essential  part  of  the  bookkeeping 
sch'eme.  Typical  auxiliary  books  are  the  Notes  Receivable  Book  and  the  Notes  Payable 
Book,  which  as  ordinarily  kept  are  merely  books  of  memorandum,  the  principal  purpose 
of  which  is  to  remind  the  bookkeeper  when  the  notes  fall  due. 

There  are  two  principal  problems  which  it  is  the  province  of  the  bookkeeper  to 
solve.  One  problem  is:  Is  the  business  being  conducted  at  a  profit  or  a  loss,  and 
how  much?  The  other  problem  is:  What  is  the  business  worth — that  is,  what  does  it 
owe  and  what  does  it  own? 

In  order  to  solve  these  two  great  proljlems,  the  bookkeeper  must  first  solve  many 
smaller  individual  problems. 

Every  transaction  consists  of  an  exchange  of  values.  The  things  of  value  in  which 
the  business  deals  in  its  transactions  must  be  classified  under  .separate  headings,  all  receipts 
and  payments  of  cash  under  one  heading,  all  purchases  and  sales  of  Mtlse.  under  another, 
all  expense  items  under  another,  all  costs  and  returns  for  interest  vmder  another,  all 
dealings  with  any  certain  person  under  another,  and  so  on. 

When  all  entries  are  correctly  classified  it  is  found  that  each  group  of  entries  con- 
stitutes a  separate  problem.  How  much  cash  is  on  hand?  What  has  been  the  gain  or 
loss  on  Md.se.?  What  has  been  the  gain  or  loss  for  interest?  How  much  does  Smith 
owe  us?  What  do  we  owe  Jones?  And  so  on.  After  these  separate  problems  have 
been  solved,  the  bookkeeper  is  in  a  position  to  solve  the  two  principal  proljlems  of  the 
business,   mentioned  above. 

Accounts  are  the  separate  records,  kept  in  the  ledger,  of  things  having  value  in 
which  the  business  deals. 

For  a  definition  of  value,  see  page  41. 


DEFINITIONS    AND    PRINCIPLES 


43 


You  have  studied  the  following  accounts:  Cash,  merchandise,  real  estate,  furnitxire  and  fixtures,  notes 
receivable,  notes  payable,  personal  accounts,  expense,  interest.  Answer  the  following  questions  in  regard 
to  each: 

1.  What  is  the  purpose  of  the  account?  4.  May  it  have  an  inventory  or  inventories? 

2.  \\  hat  is  the  method  of  handling  it?  5.  How  is  it  closed? 

3.  WhaX  result  does  it  exhibit  at  closing?  6.  What  is  brought  down? 

7.  What  kind  of  value  is  recorded  in  the  account — cash,  property,  claims,  services,  or  uses?  (Note: 
The  expense  account  ordinarily  records  services,  but  certain  kinds  of  property  are  charged  to  the  expense 
account,  when  they  are  to  be  used  in  conducting  the  business  (i.  e.  coal,  postage  stamps,  etc  ),  so  that 
this  is  in  this  sense  a  mixed  account. 

Each  account,  as  previously  stated,  constitutes  a  separate  problem.  The  problem 
of  the  account  may  be  to  determine  the  amount  of  something  on  hand,  the  extent  of  some 
obligation,  or  the  amount  of  loss  or  gain  on  some  particular  thing  of  value  dealt  in. 

In  solving  the  problem  presented  by  any  account  not  only  is  its  principal  result 
shown,  but  a  number  of  lesser  problems  are  solved  in  the  process.  For  instance,  in  solv- 
ing the  cash  problem,  the  bookkeeper  finds  out  not  only  how  much  cash  should  be  on 
hand,  but  how  much  was  received  during  a  certain  period  and  how  much  was  paid  out 
during  a  certain  period.  In  solving  the  problem  of  gain  or  loss  on  Mdse.,  he  finds  out 
incidentally  what  were  the  total  purchases,  total  sales,  cost  of  goods  sold,  etc. 


Summary  of  Rules 

Debit 
Debit  the  cash  account  when  cash  is  received. 

Debit  the  merchatidise  account  when  Mdse.  is 
received  or  costs  \'alue. 

Debit  the  real  estate  account  when  real  estate  is 
received  or  costs  value. 

Debit  the  furniture  &  fixtures  account  when  furni- 
ture &  fixtures  are  received  or  cost  value. 

Debit  the  notes  receivable  account  when  other 
persons'  notes  are  received  or  cost  value. 

Debit  the  notes  payable  account  when  we  redeem 
notes  issued  by  us. 

Debit  the  interest  account  when  we  receive  the  use 
of  other  persons'  money  and  it  costs  us  value. 

Debit  a  personal  account  when  we  receive  a  claim 
against  the  person  or  the  person  costs  us  vaHie. 
(When  we  sell  to  a  customer  on  credit  or  pay  a 
creditor  on  account.) 

Debit  the  proprietor's  accoimt  for  amounts  with- 
drawn by  him  and  for  the  net  loss  of  the  busi- 
ness as  periodically  determined. 

Debit  the  general  expense  account  for  all  items  of 
cost  incurred  in  running  the  business  or  which  are 
consumed  in  the  using  except  for  such  items  as 
are  kept  in  some  separate  expense  account. 


for  Journalizing 

Credit 
Cretlit  the  cash  account  when  cash  is  ]:iaid  out. 

Credit  the  merchandise  account  wlien  Mdse.  is  dis- 
posed of  or  produces  returns. 

Credit  the  real  estate  account  when  real  estate  is 
disposed  of  or  produces  returns. 

Credit  the  furniture  &  fixtiu-es  account  when  furni- 
ture &  fixtures  are  disposed  of  or  produce  returns. 

Credit  the  notes  receivable  account  when  other 
persons'  notes  are  disposed  of  or  produce  returns. 

Credit  the  notes  payable  account  when  we  issue 
notes. 

Credit  the  interest  account  wlien  we  part  with  the 
use  of  our  money  and  it  produces  us  returns. 

Credit  a  personal  account  when  we  give  another  a 
claim  against  ourselves  or  the  person  produces 
value  to  us.  (When  we  buy  from  a  creditor  on 
account,  or  receive  pay  from  a  customer.) 

Credit  the  proprietor's  account  for  amounts  in- 
vested by  him  and  for  the  net  gain  of  the  busi- 
ness as  periodically  determined. 

Credit  the  general  expense  account  for  rebates  and 
returns  on  items  which  have  been  debited  to  it. 


44  JOURNALIZING 

The  Journal  is  a  book  of  original  entry.  When  it  is  the  only  book  of  original  entry, 
all  business  transactions  are  recorded  in  it  in  the  order  of  their  occurrence.  A  record 
of  a  single  transaction  is  called  an  entry. 

A  Journal  Entry  consists  of  a  statement  of  the  delDits  and  credits  arising  from  a 
single  transaction;  that  is,  it  states  what  account  or  accounts  are  to  be  debited,  and  what 
account  or  accounts  are  to  be  credited,  and  how  much.  The  journal  entry  must  use  the 
exact  names  of  the  accounts  affected  in  each  transaction. 

The  General  Rule  for  Debiting  and  Crediting  is :  Debit  the  account  of  the  thing  which 
is  received  or  costs  value.  Credit  the  account  of  the  thing  which  is  disposed  of  or  pro- 
duces returns. 

The  thing  which  is  received  always  costs  value  (since  something  has  to  be  given  in 
exchange  for  it).  The  thing  which  is  disposed  of  always  produces  returns  (since  some- 
thing is  received  in  exchange  for  it). 

Double  Entry  Bookkeeping  is  that  method  which  requn-es  entries  on  both  the  debit 
and  credit  sides  of  the  ledger  for  every  transaction.  This  is  the  scientific  method,  the 
method  in  general  use  by  those  who  wish  their  bookkeeping  to  guide  them  in  the  conduct 
of  their  business,  and  it  is  the  method  you  will  study  chiefly  in  this  text. 

Single  Entry  Bookkeeping  is  a  simple  device  for  keeping  accounts  (usually)  with 
persons  and  cash  only,     A  single  entry  set  is  presented  on  page  150. 


CHAPTER  III 

POSTING— THE  TRIAL  BALANCE 

Lesson  XIII. 

EQUALITY    OF    DEBIT    AND    CREDIT 

How  much  is  a  man  worth?  Mr.  IMaek  has  SIOOO.OO  in  cash.  He  owns  nothing 
else  ami  owes  nothing.     This  is  the  simplest  case  imaginable,  anil  we  say 

$1000.00=  What  Mr.  Black  is  worth. 

Problem  1.  A  has  $S6.75  in  his  cash  register  and  $500.00  on  deposit  at  the  bank.  He  owns 
nothing  else  and  owes  notliing.     How  much  is  he  wortli? 

Problem  2.  B  has  S50  75  in  liis  cash  drawer,  $226.65  on  deposit  at  the  First  National  Bank,  and 
$500.00  deposited  in  the  savings  bank.     He  owns  nothing  else  and  owes  nothing.     How  much  is  he  worth? 

In  bookkeeping  we  deal  with  the  affairs  of  a  business,  not  a  man.  Mr.  Black  may 
have  part  of  his  thousand  dollars  invested  in  one  business  and  part  in  another.  Let  us 
assume  that  he  has  $500.00  invested  in  a  certain  business.  This  case  is  also  simple,  and 
we  say 

$500.00  cash  =Mr.  Black's  investment  in  the  business,  $500.00. 

It  is  not  necessary  that  an  investment  be  entirely  cash.  It  may  consist  of  or  include 
anything  of  value  which  the  proprietor  owns  and  wishes  to  put  into  the  business. 
Suppose  that  Mr.  Black  had  put  into  the  business  a  stock  of  merchandise  worth  $200.00, 
furniture  and  fixtures  worth  $100.00,  a  note  against  Mr.  Brown  for  $100.00,  and  only 
$100.00  in  cash.  His  investment  would  have  been  just  the  same  as  in  the  preceding 
illustration,  but  would  have  been  expressed  thus: 


Cash,  $100.00' 

Mdse.,  $200.00 

Furn.  &  Fix.,  $100.00 

Notes  Rec,  $100.00 


=Mr.  Black's  investment,  $500.00. 


Problem  3.  C  invests  $225.00  in  cash,  Mdse.  worth  $526.70,  furniture  and  fixtures  which  he  values 
at  $175.00,  and  an  account  against  X  for  $120.60.  He  owns  nothing  else  and  owes  nothing.  How  much 
is  the  business  worth?     Prepare  your  statement  in  the  form  shown  above. 

Problem  4.  D  has  $96.50  in  his  cash  register  and  $452.60  on  deposit  at  the  bank.  He  owns  a  store 
and  lot  valued  at  $8600.00,  Mdse.  inventoried  at  $2346,75,  and  fixtures  valued  at  $236.50.  He  holds  a 
note  against  X  for  $100.00,  and  an  account  against  Z  for  $76.90.  He  owns  nothing  else  and  owes  nothing. 
If  this  is  all  invested  in  a  business,  how  much  is  the  business  worth? 

It  will  be  noted  that  the  total  of  the  items  on  the  left-hand  side  in  the  illustration 
above  are  exactly  equal  to  the  amount  of  Mr.  Black's  investment,  as  shown  at  the  right. 
If  a  journal  entry  were  made,  the  four  items  on  the  left  would  be  entered  as  debits  and 

45 


46  POSTING 

the  amount  of  Mr.  Black's  investment  would  be  entered  as  a  credit.  State  the  reason 
in  each  case. 

If  such  a  journal  entry  were  made  and  posted,  the  four  items  on  the  left,  showing 
as  debits  in  the  journal  entry,  would  be  posted  to  the  left-hand  or  debit  side  of  the  ledger. 
Similarly  the  item  on  the  right,  showing  as  a  credit  in  the  journal  entry,  would  be  posted 
to  the  right-hand  or  credit  side  of  the  ledger.  It  is  apparent  that  there  would  then  be 
$500.00  on  the  debit  side  of  the  ledger  and  $500.00  on  the  credit  side  of  the  ledger.  This 
equality  between  the  debit  and  credit  sides  of  the  ledger  is  always  maintained  to  the  cent. 
To  further  illustrate  this  point,  let  us  again  take  up  Mr.  Black's  business. 

As  Mr.  Black's  ledger  now  stands  the  debit  and  credit  sides  are  exactly  equal,  as 
follows: 

Debit  Side       Credit  Side 

$500.00   =  $500.00 

Suppose  that  Mdse.  is  sold  for  cash,  $100.00.     The  journal  entry  for  this  transaction 
would  debit  cash  $100.00  and  credit  Mdse.  $100.00.     This  debit  and  credit  would  be 
posted  to  the  letlger,  without  disturbing  the  equality  of  the  debit  and  credit  sides,  as  , 
the  following  will  show: 

Debit  Side      Credit  Side 

$500.00 $500.00 

100.00 100.00 

$600.00 $600.00 

Assuming  that  other  transactions  take  place  as  noted  below,  trace  the  effect  of  each 
transaction  upon  the  ledger,  particularly  noting  that  since  the  debit  side  and  the  credit 
side  are  increased  by  the  same  amounts  each  time,  the  equality  between  the  two  sides  is 
not  disturbed. 

Transactions  Jouenal  Entry  Ledger 

Debit  Side  Credit 


Bought  Mdse.  for  cash,  $50.00 

Sold  Mdse.  to  Geo.  Green  on  .acct.  S7S.00 


And  so  this  exercise  might  be  continued  indefinitely  without  disturbing  the  equality 
between  the  two  sides  of  the  ledger.  The  original  investment  consists  of  equal  debits 
and  credits,  so  that  the  footings  of  the  ledger  are  equal  to  start  with.  Every  transaction 
consists  of  equal  debits  and  credits.  The  two  sides  of  the  ledger  are  therefore  increased 
equally  for  each  transaction,  leaving  the  total  footings  equal  at  all  times. 


Dr.  Mdse.,  S50.00,  Cr.  Cash.  $50.00 

S600.00 
50.00 

$600.00 
50.00 

Dr.  Geo.  Green,  $75.00,  Cr.  Mdse.,  $75.00 

$650.00 
75.00 

$650.00 
75.00 

Dr.    Ca.sh    $101.00,   Cr.    Notes    Rec.    $100.00, 
Cr.  Int.  $1.00 

$725.00 
101.00 

$725.00 

100.00 

1.00 

A     MODEL    SET  47 

Posting 

From  what  has  preceded,  the  relation  between  the  journal  and  the  ledger  is  jx-r- 
fectly  clear.  Let  us  briefly  review  the  situation:  The  journal  is  the  book  of  original 
entry.  The  debits  and  credits  arising  from  the  transactions  of  the  business  are  stated 
in  the  journal  just  as  they  must  appear  in  the  ledger.  These  debits  and  credits  are  written 
in  the  journal  at  the  time  of  their  occurrence  and  in  the  order  of  their  occurrence.  Later 
they  are  transferred  to  the  ledger,  each  item  being  written  in  its  own  account. 

The  process  of  transferring  items  of  debit  and  credit  from  the  journal  to  the  ledger 
is  called  "posting."  Before  you  can  be  taught  to  post  you  must  have  something  to  post. 
You  will  therefore  journalize  the  following  transactions. 

Your  only  considerations  at  this  time  relate  to  the  journalizing  itself.  Be  sure  to 
state  correctly  the  names  of  accounts  to  be  debited  and  credited,  and  the  amounts.  Be 
sure  the  debits  in  each  entry  exactly  equal  the  credits  in  that  entry.  Be  sure  that  each 
part  of  each  entry  is  exactly  in  its  position.  Let  your  explanation  for  each  entry  be  full 
and  complete,  omitting  no  essential  detail.  Write  neatly  and  plainly,  being  especially 
careful  to  make  your  figures  distinct,  each  scjuarely  in  its  own  column.  This  work  may 
be  prepared  first  on  loose  sheets. 

Lesson  XIV 
A  MODEL  SET 

Transactions 

191— 

Jan.     1.     F.  R.  Elliott  has  this  day  engaged  in  business  at  7741  Union  Ave.,  Auburn, 

111.,  investing  as  follows:   Cash  on  hand,  $176.25;  cash  in  the  First  National 

Bank,  $4500.00. 
Jan.    2.     Bought  from  H.  B.  Doan  &  Co.,  1439  Market  St.,  for  cash,  6  doz.  men's 

woolen  gloves  at  $4.50,  $27.00;  9  doz.   men's  fleece-lined  kid  gloves,   at 

$6.00,  $54.00;  total,  $81.00. 
Jan.    3.     Bought  for  cash  from  the  Acme  Furniture  Co.,  423  W.  43d  St.,  City,  4 

-  plate  glass  show  cases,  at  $56.50  each,  $226.00. 
Jan.    4.     Bought  from  Dale  &  Allen,  Gloversville,  N.  Y.,  on  account,  3  doz.  men's 

cape  gloves,  at  $15.00,  $45.00;  5  doz.  men's  suede  gloves,  at  $13.50,  $67.50; 

total,  $112.50. 
Jan.    4.     Paid  the  bookkeeper's  salary  for  the  week  ending  Jan.  4,  in  cash,  $15.00. 
Jan.    6;     Sold  to  C.  E.  Rayburn,  4856  S.  Drexel  BouL,  1\  doz.  men's  silk-lined  mocha 

gloves,   at  $15.00,  $22. ,50,   receiving  in  exchange  his  20-day  note  at  6% 

for  the  amount. 
Jan.    7.     Received  from  F.  White  &  Co.,  469  Madison  St.,  2  doz.  ladies'   16-inch 

mocha  gloves,   at  $24.00,  $48.00;   1   doz.  ladies'   long  kid  gloves,  $27.50; 

total,  $75.50.     Gave  them  our  15-day  note  at  6%  for  the  amount. 
Jan.    8.     Sold  to  H.  E.  Runyon,  7626  Lowe  Ave.,  on  account,  Ih  doz.  men's  cape 

gloves,   at  $18.00,  $27.00;  2  doz.   mens'   suede  gloves   at  $16.25,   $32.50; 

total,  $59.50. 
Jan.    9.     Sold  for  cash  1  doz.  ladies'  16-inch  mocha  gloves,  $27.50. 


Jan.  11.     Paid  the  bookkeeper's  salary,  $15.00,  in  cash,  deducting  $1.25  for  a  pair 

of  men's  cape  gloves  at  cost  price. 
Jan.  1.3.     Sold  to  L.  V.  Bradley,  6361  Yale  Ave.,  on  account,  1  doz.  ladies'  16-inch 

mocha  gloves,  $27.50;  H  doz.  men's  silk-lined  mocha  gloves,   at  $18.00, 

$27.00;  total,  .$54.50. 
Jan.  14.     Bought  from  Yawman  &  Erbe,   Rochester,   New  York,  a  complete  filing 

case  for  office  use,  $187.50,  giving  them,  our  60-day  note  without  interest 

for  the  amount. 
Jan.  15.     Sold  to  H.  E.  Runyon,  on  account,  3  doz.  men's  woolen    gloves,  at  $5.75, 

$17.25;  2  doz.  men's  fleece  lined  kid  gloves,  at  $9.50,  $19.00;  total,  $36.25. 
Jan.  18.     Paid  the  bookkeeper's  salary  in  cash,  $15.00. 

Lesson  XV 
POSTING 

Having  written  all  of  the  above  transactions  in  your  journal,  it  now  becomes  necessary 
to  get  the  entries  into  the  ledger.  This  is  accomplished  by  the  process  of  posting,  as  sug- 
gested on  a  previous  page. 

Before  posting  to  the  ledger,  it  will  be  well  to  write  the  headings  of  the  different 
ledger  accounts,  so  that  your  posting  will  not  be  interrupted.  Allow  for  each  account 
one  line  for  the  heading,  one  line  for  the  year  date,  and  the  number  of  lines  indicated  in 
the  following  list. 

Page  6.    F.  R.  Elliott,  Proprietor,        7  lines  Cash,  12  lines 

Notes  Receivable,  10  lines 

ige  8.  H.  E.  Runyon,  7626  Lowe  Ave.,  10  lines 
L.  V.  Bradley,  6361  Yale  Ave.,  9  lines 
Notes  Payable,  7  lines 

Bale  &  Allen,  Gloversville,  N.  Y.,     7  lines 

Write  the  ledger  headings  in  a  bold,  strong,  plain  hand,  somewhat  larger  than  your 
ordinary  writing.  The  address  should  always  show  as  a  part  of  the  heading  of  a  personal 
account.  It  should  be  written  on  the  year  date  line,  a  little  to  the  right,  and  in  a  smaller 
hand.  Rule  a  double  red  line  across  the  page  one  line  below  the  heading,  on  the  year 
date  line.  See  illustrations  on  pages  9  and  33.  When  all  the  ledger  headings  have  been 
written,  proceed  to  post  the  journal  entries  to  the  ledger,  as  follows: 

The  first  item  of  the  first  transaction  is  "Cash,  Dr.,  $4676.25."  Enter  this  in  the 
cash  account  in  the  money  colunm  on  the  debit  side,  using  the  date  shown  in  the  journal 
and  being  careful  to  place  the  year  date  at  the  top  of  the  date  column.  The  narrow 
column  at  the  left  of  the  money  column  is  for  the  journal  page;  place  in  this  column  the 
figure  20*,  which  shows  the  page  of  the  journal  fro)n  which  the  item  was  posted.  Last, 
write  the  amount,  being  careful  to  get  each  figure  squarely  in  its  own  column.  Then,  in 
the  journal,  in  the  narrow  column  at  the  left  of  the  word  "cash,"  write  the  number  of 
the  ledger  page  to  which  the  item  was  posted  (7).  This  completes  the  posting  of  the 
first  item  of  the  first  transaction. 


Merchandise, 

15  lines 

Furniture  &  Fixtures, 

7  lines 

Expense, 

8  lines 

Interest  &  Discount, 

7  lines 

Loss  &  Gain, 

8  hues 

*This  and  other  folios  used  in  the  model  forms  on  pages  50,  51,  and  52  are  not  necessarily  the  same 
I  you  will  use. 


THE    TRIAL    BALANCE  49 

The  second  item  of  the  first  transaction  in  the  journal  is:  "  F.  R.  Elliott,  Cr.,  $4676.25." 
Enter  this  in  F.  R.  Elliott's  account  on  the  credit  side.  Show  in  the  narrow  folio 
column  in  the  ledger  the  page  of  the  journal  (20)  from  which  the  item  was  posted.  Last, 
write  the  amount  in  the  money  column.  Show  in  the  narrow  folio  column  in  the  journal 
the  page  of  the  ledger  to  which  the  item  was  posted  (6). 

Post  the  rest  of  the  transactions,  observing  carefully  the  following  points : 

(1)  Each  debit  item  in  the  journal  must  be  posted  to  the  debit  side  of  the  ledger; 
each  credit  item  in  the  journal  must  be  posted  to  the  credit  side  of  the  ledger. 

(2)  The  dates  and  amounts  in  the  ledger  must  agree  with  the  dates  and  amounts  in 
the  journal. 

(3)  Each  ledger  item  must  show  in  its  folio  column  the  page  of  the  journal  from 
which  the  item  was  posted.  Each  journal  item  must  be  similarly  postmarked  to  show 
the  ledger  page  to  which  it  was  posted.  These  folios  must  be  entered  at  the  exact  instant 
of  posting  in  each  case,  as  their  presence  shows  that  posting  has  been  done  and  their  absence 
shows  that  posting  has  not  been  done. 

(4)  The  year  date  must  show  at  the  top  of  every  date  column  in  the  ledger.  This 
applies  to  both  sides  of  each  account;  a  year  date  at  the  top  of  each  page  only  is  not 
sufficient  if  there  are  more  than  one  account  on  the  page. 

When  you  have  posted  all  journal  entries,  the  folio  column  on  the  first  page  of  your 
journal  will  be  filled,  as  in  the  model  journal  page  20  shown  herewith.  The  posted  entries 
will  appear  as  in  the  model  ledger  forms  shown.  Trace  the  entries  from  the  journal  to 
the  ledger  in  the  models,  noting  especially  the  folios  used.     The  full  ledger  is  not  shown. 

Note.'  Do  not  get  the  idea  that  in  business  posting  is  left  undone  for  several  weeks  and  then  done 
all  at  once,  as  it  is  in  this  model  set.  This  plan  is  followed  in  teaching  beginners  the  elements  of  book- 
keeping, so  as  not  to  confuse  them,  but  in  business  the  bookkeeper  must  post  as  he  gets  opportunity. 
Each  entry  could  be  posted  as  soon  as  made,  and  the  alert  bookkeeper  always  tries  to  keep  his  books 
posted  up  to  the  minute.  The  entries  in  the  journal  (and  other  books  of  original  entry)  must  be  made 
as  the  transactions  occur,  but  as  often  as  there  comes  a  lull  in  the  entering  of  new  business,  he  seizes  the 
opportunity  to  post  as  many  entries  as  he  can,  beginning  at  the  point  where  he  last  left  off,  as  shown  by 
the  folio  column  of  the  journal  (and  other  books  of  original  entry). 

Lesson  XVI 
THE  TRIAL  BALANCE 

Beginning  with  the  thought  that  the  total  of  things  invested  is  exactly  equal  to  the 
capital  of  the  business  at  the  beginning  and  the  fact  that  in  every  journal  entry  the  debit 
item  (or  items)  exactly  equals  the  credit  item  (or  items),  let  us  see  how  these  things  affect 
the  condition  of  the  ledger. 

It  is  apparent  that  the  debits  in  the  ledger  exactly  equal  the  credits  at  the  beginning, 
since  the  only  debit  is  that  in  the  cash  account  and  the  only  credit  is  that  in  the 
proprietor's  account.  Starting  with  equal  debits  and  credits,  and  posting  equal  debits 
and  credits  from  the  journal  to  the  ledger  for  every  transaction,  nothing  is  more  clear 
than  that  the  ledger  must  always  be  in  equilibrium,  or,  as  commonly  said,  "in  balance." 

You  are  now  to  demonstrate  the  fact  that  the  ledger  is  in  balance.  To  do  this  make 
a  list  of  all  ledger  accounts  and  write  opposite  the  name  of  each  account  the  amounts  of 
total  debits  ard  credits,  as  ascertained  from  the  ledger.     This  is  a  full  trial  balance  by 


60 


2-0. 


THE    JOURNAL,    AFTER    POSTING 


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MODEL    FORMS 
THE    TRIAL    BALANCE 


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footings.*     When  all  amounts  are  entered  in  it,  the  total  of  its  debit  column  and  credit 
column  should  exactly  agree. 

At  the  top  of  the  page  write  the  heading  Trial  Balarice,  Jan.  18,  191 — .  For  con- 
venience, and  to  save  yourself  the  trouble  of  again  adding  the  ledger  columns  down  to 
this  point,  you  may  now  foot  all  columns  in  the  ledger,  making  small,  neat  lead-pencil 
figures  just  below  the  last  item  in  each  column,  as  shown  in  the  models  of  ledger  accounts, 
being  careful  in-  each  case  to  leave  room  for  the  item  that  is  to  be  written  later  on  the 
next  line  below.  In  the  folio  column  at  the  left  of  the  names  of  the  accounts  ILsted  in  the 
trial  balance,  write  the  page  on  which  the  account  is  found  in  the  ledger,  for  reference. 
A  model  form  of  trial  balance  is  shown  above.  Your  trial  balance  will  be  like  it  in 
form,  but  you  will  have  to  determine  the  correct  amounts  yourself  and  your  folios  may 
be  different.  When  your  trial  balance  has  been  approved,  copy  it,  or  prepare  it  again 
independentl}',  as  your  teacher  shall  direct,  on  page  1  of  Book  3,  Blanks  No.  I. 


Checking  the  Trial  Balance 

It  may  be  that  the  debit  and  credit  footings  of  the  trial  balance  you  prepare  will 
not  agree.  If  so,  some  mistake  has  been  made.  They  must  agree  exactly.  You  will 
have  to  check  over  your  work  in  order  to  find  your  mistake.  This  checking  is  done  in  an 
order  exactly  reverse  to  that  in  which  the  work  was  done,  for  reasons  which  you  will 
readily  understand:     (1)   You  are  more  likely  to  discover  an  error  if  you  check  over  your 

*Trial  balances  are  usually  taken  by  differences;  i.  e.,  the  difference  between  the  two  sides  of  each 
account  is  shown  only,  instead  of  the  full  footings,  both  debit  and  credit.     You  will  learn  about  this  later. 


TRANSACTIONS    FOR    MODEL    SET — CONTINUED  53 

work  in  an  order  different  from  that  in  which  it  was  done.  If  you  should  go  over  your 
work  in  the  same  way  you  went  over  it  the  first  time,  you  might  make  the  same  mistake. 
(2)  The  error  will  probably  be  discovered  more  quickly,  because  the  chances  are  that 
the  error  was  in  the  latter  part  of  the  work. 

Note  that  you  are  to  check  the  work,  not  merely  to  inspect  it.  It  seems  slower  to 
check  work  than  to  glance  over  it,  but  experience  has  proved  that  the  discovery  of  errors 
is  much  more  sure  and  quick  when  the  checking  is  done.     Proceed  as  follows: 

(1)  Again  add  the  columns  of  the  trial  balance,  adding  in  the  direction  reverse  to 
the  direction  in  which  you  first  added  them.  (Whenever  you  have  occasion  to  test  your 
own  addition,  add  downwards  if  you  added  upwards  before,  or  vice  versa.)  Check  the 
footings  as  you  find  them  correct. 

(2)  Check  back  from  the  trial  balance  items  to  the  ledger  footings,  placing  a  check 
mark  opposite  each  trial  balance  item  and  a  dot  opposite  the  ledger  footing  which  it  repre- 
sents as  you  find  them  to  be  in  agreement. 

(3)  Again  add  the  ledger  columns,  verifying  the  accuracy  of  j'our  first  addition. 
Check  the  footings  as  j'ou  find  them  to  be  correct. 

(4)  Check  back  from  the  ledger  to  the  journal,  placing  a  check  mark  opposite  each 
ledger  item  and  another  check  mark  opposite  its  corresponding  journal  entry  as  you  find 
them  to  be  in  agreement. 

(5)  Inspect  the  journal  to  see  that  every  item  has  been  checked  once,  and  no  item 
checked  twice. 

(6)  Inspect  the  journal  to  be  certain  that  the  separate  entries  contain  equal  debits 
and  credits.  When  there  are  many  complicated  entries  in  the  journal,  this  may  be 
done  more  readily  by  adding  the  debit  and  credit  columns  for  an  entire  page  than  by 
the  slower  process  of  inspecting  each  entry. 

As  soon  as  an  error  or  errors  are  discovered  which  will  account  for  the  discrepancy 
in  your  trial  balance,  your  search  is  at  an  end.     Further  checking  would  be  to  no  purpose. 

In  checking,  form  the  habit  of  placing  the  check  marks  ( /)  neatly  in  a  column, 
always  making  them  the  same  size  and  shape.  They  are  more  easily  seen  if  they  are  in 
a  neat  column,  and  need  not  be  large  or  made  heavily.  Nothing  looks  worse  than  a  ledger 
covered  with  scrawling  checkmarks  of  various  sizes  and  shapes. 

Enter  the  remaining  transactions  for  the  month  of  January,  as  shown  below.  The 
transaction  dated  Jan.  20  is  entered  just  below  the  last  entry  in  the  journal  as  though 
there  had  been  no  interruption  for  posting. 

Lesson  XVII 

Transactions  for  January — Continued 

Jan.  20.  Sold  to  L.  V.  Bradley,  on  account,  3  doz.  men's  suede  gloves,  at  .$16.50, 
■149.50;  3  doz.  men's  woolen  gloves,  at  .S6.50,  $19.50;  1  doz.  ladies'  long 
kid  gloves,  $32.50;  also  one  of  our  plate  glass  show  cases,  second  hand, 
for  $52.00;  total  charged  to  him,  $153.50. 

Jan.  22.  Redeemed  our  note  in  favor  of  F.  White  &  Co.  The  note  was  dated  Jan.  7 
and  was  for  15  days  at  6%.  Face  of  note,  $75.50;  interest,  19^;  amount 
of  our  check,  $75.69. 


54  POSTING 

Jan.  23.  H.  E.  Runyon  gave  us  his  check  for  $59.50,  in  full  settlement  of  our  bill 
against  him  dated  Jan.  8. 

Jan.  24.  We  discounted  our  note  dated  Jan.  14  in  favor  of  Yawman  &  Erbe,  mail- 
ing them  our  check  for  the  net  amount  due.  This  note  was  for  $187.50, 
and  was  due  60  days  from  its  date  without  interest.  Discount  for  50  days 
at  6%,  $1.56;  amount  of  our  check,  $185.94.* 

Jan.  25.     Paid  the  bookkeeper's  salary  in  cash,  $16.00. 

Jan.  27.  C.  E.  Rayburn  paid  us  in  cash  for  his  note  of  Jan.  6,  $22.50,  and  8^  for 
interest  for  21  days  at  6%;  total  cash  received,  $22.58. 

Jan.  27.  Bought  from  Dale  &  Allen,  on  account,  10  doz.  men's  silk-lined  kid  gloves, 
at  $9.50,  $95.00;  9  doz.  men's  silk-lined  suede  gloves,  at  $9.50,  $85.50; 
total,  $180.50. 

Jan.  28.  Sold  to  H.  K.  Armstrong,  4759  S.  Park  Boul.,  on  his  60-day  note  at  6%, 
5  doz.  men's  silk-lined  kid  gloves,  at  $12.50,  $62.50. 

Jan.  29.  Sold  to  H.  E.  Runyon,  on  account,  4  doz.  men's  silk-lined  suede  gloves, 
at  $12.75,  $51.00. 

Jan.  30.  L.  V.  Bradley  glive  us  his  30-day  note  at  6%  for  $153.50,  the  amount  of 
our  bill  against  him  of  Jan.  20.     The  note  was  dated  as  of  Jan.  20.  ' 

Jan.  31.  Bought  from  the  Etna  Woolen  Mills,  7548  Emerald  Ave.,  3  doz.  men's 
woolen  sweaters,  at  $9.75,  $29.25;  3  doz.  Juvenile  sweater  coats,  at  $12.00, 
$36.00;  2  doz..  ladies'  knit  golf  vests,  at  $15.00,  $30.00;  total,  $95.25.  Gave 
them  our  60-day  note  at  6%  for  the  amount  of  the  bill. 

Post  all  the  transactions  from  Jan.  20  to  Jan.  31  inclusive  and  take  a  trial  balance. 

In  adding  the  columns  in  your  ledger  it  will  only  be  necessary  to  foot  the  amounts 
entered  since  Jan.  18,  including  the  lead  pencil  footings  entered  at  that  time.  The  trial 
balance  of  Jan.  31  can  be  written  on  the  lower  half  of  page  1  of  the  Trial  Balances 
and  Statements  Book — Book  3  of  Blanks  No.  I. 


*The  student  will  note  that  interest  and  discount,  being  similar  in  nature,  are  recorded  in  tlie 
same  account.  Discount  of  this  kind  must  not  be  confused  with  cash  cHscount,  about  which  you  will 
learn  later. 


CHAPTER  IV 

STATEMENTS* 

Lessont  XVIII 

THE  FINANCIAL  STATEMENT 

Two  principal  facts  about  his  business  whicii  a  man  wishes  to  be  in  a  position  to 
ascertain  are      (1)  Its  condition;  (2)  Its  progress. 

By  "condition"  is  meant  the  worth  of  the  lousiness  at  a  given  time.  "Progress" 
refers  to  the  gain  or  loss,  as  the  case  may  be,  during  a  certain  period,  or  from  one  date 
to  another. 

Neither  condition  nor  progress  can  be  determined  entirely  from  the  ledger,  as  tlie 
inventories  must  be  known  before  condition  and  progress  can  be  determined,  and  the 
ledger  does  not  show  present  inventories.  Most  of  the  necessary  facts,  however,  are 
shown  in  the  ledger. 

The  condition  of  the  business  is  shown  by  a  specially  prepared  statement  of  the  busi- 
ness called  the  Financial  Statement.  Before  proceeding  to  analyze  this  statement  or  to 
study  its  form,  solve  the  following  problems.  If  you  do  this  work  thoughtfully,  you  will 
be  led  unconsciously  into  an  understanding  of  the  principles  underlying  the  Financial 
Statement,  though  its  form  will  still  be  unfamiliar  to  you. 

PROBLEMS 

Problem  1.  On  Jan.  31,  191 — ,  A's  ledger  showed  investments  as  follows:  Cash,  $5464.75;  Notes 
Receivable,  $560.50;  due  from  B,  $225.00.  W'hat  was  the  condition  of  the  business  (what  was  it  worth)? 
Problem  2.  On  Feb.  28,  191—,  Mr.  B's  ledger  showed:  Cash,  Dr  $5000.00,  Cr.  ,$2673.-10;  Notes 
Receivable,  Dr.  $650.00,  Cr.  $325.40;  A.  R.  Barnes,  Dr.  $450.75,  Cr.  $225.90;  E  G.  Holm,  Dr.  $226.76, 
Cr.  $59.72.  He  had  on  hand  furniture  and  fixtures  valued  at  $475.50  and  a  stock  of  goods  worth  $4376.80 
— facts  not  shown  in  the  ledger.     What  was  the  worth  of  the  business? 

Problem  3.  Mr.  C,  desiring  to  ascertain  the  condition  of  his  business,  told  his  bookkeeper:  "Our 
merchandise  inventory  on  Mar.  31,  191 — ,  was  $7560.00,  our  furniture  and  fixtures  inventory  was  $740.69, 
and  I  valued  tliis  store  and  lot,  which  I  own,  at  $15,000.00.  Make  me  a  statement  showing  the  condition 
of  this  business  on  Mar.  31."  The  bookkeeper  referring  to  the  ledger  found  that  on  Mar.  31  the  accounts 
had  stood  as  follows.  Cash,  Dr.  $4560.70,  Cr.  $2389.60;  Notes  Receivable,  Dr.  $789.20,  Cr.  $384.50;  I.  J. 
Green,  Dr.  $326.07,  Cr.,  $100.00.  A\'hat  was  the  worth  of  the  business  on  Mar.  31,  as  reported  by  the 
bookkeeper? 

Problem  4.     On  April  30,  191—,  D  had  $167.20  in  the  cash  drawer  and  $.3000.00  in  the  bank.     He 
held  a  note  against  W  for  $450.00,  and  X  owed  him  $224.67  on  account.     He  owed  Y  $370.60,  and  there 
was  outstanding  against  him  a  note  in  favor  of  Z  for  $275.75.     He  valued  his  furniture  and  fixtures  at 
$780.93  and  his  stock  of  Mdse.  at  $3467.25.     AVhat  was  D's  business  worth? 
Problem  5.     Accounts  in  E's  ledger  stood  as  follows  on  May  31; 

Cash  $5467.20  $2869.46 

Notes  Receivable  482.29  321.40 

B.  F.  Adams  300.50  210.00 

H.A.Dow  250.00  105.50 

Notes  Payable  200.00 

R.  L.  McNeal  1 00 .  00  640 .  76 

Inventories:  Mdse.,  $4756.82;  Real  Estate,  $6500.00;  Furniture  &  Fixtures,  $295.00.  How  much 
was  E's  business  worth? 


♦Teachers  who  prefer  to  use  the  two-page  statement  forms  will  instruct  students  to  study  pages  144 
to  148  of  the  appendix  at  this  time,  omitting  Lessons  XVIII  and  XIX,  except  as  reference  to  parts  of 
these  lessons  is  made  in  the  corresponding  lessons  of  the  appendix. 

55 


56 


STATEMENTS 


Study  carefully  the  illustration  below  and  the  explanation  accompanying  it,  and 
make  a  financial  statement  for  F.  R.  Elliott's  business  as  it  stood  on  Jan.  31.  It  is  assumed 
that  all  the  accounts  in  your  ledger  are  correct,  and  that  your  trial  balance  of  Jan.  31 
has  been  approved  by  your  teacher. 

In  order  to  make  the  financial  statement,  you  must  know  the  inventories,  which  are 
as  follows:  Mdse.,  $314.56;  Furniture  &  Fixtures,  $350.00.  (Accrued  interest  on  notes 
receivable,  being  very  little,  is  not  taken  into  consideration  here  as  an  inventory.) 

In  form,  your  statement  will  be  like  the  model  shown  herewith.  The  amounts 
will  have  to  be  supplied  by  you. 

Form  of  Financial  Statement 


Cp<i.^:Ul,^ 


^::X;^yi-^^-<  K-<^^ 


^dt^n^t^-e-ft^k^T^ 


x.^Z-ff-SiuO'  ei-d<t^^^ 


t,-^  C'tz^t.-i^i^iei-^ 


?  ?  ?  ? 

3/ 

3  SO 

?  '  ? 

?  ? 

?  ? 


?? 


Explanation.  To  determine  the  condition  of  a  business  two  things  must  be  known. 
(1)  What  things  of  value  does  the  business  own  (assets)?  (2)  What  does  the  busine.ss 
owe  (liabilities)?  The  difference  between  the  total  of  assets  and  the  total  of  liabilities 
is  the  net  capital  or  present  worth  of  the  business.  In  order  to  know  what  the  assets  and 
liabilities  are,  the  bookkeeper  must  have  a  complete  list  of  all  inventories  and  all  open 
accounts  in  the  ledger,  and  he  must  know  which  accounts  show  assets,  which  accounts 
show  liabilities,  and  which  accounts  show  neither  assets  nor  liabilities,  but  something  else. 

In  the  above  case,  the  first  asset  is  cash.  The  amount  of  cash  on  hand  is  the  differ- 
ence between  the  debit  and  credit  sides  of  the  cash  account.     Next  come  the  inventories 


THE    LOSS    AND    GAIN    STATEMENT  57 

of  property.  These  must  be  known  by  the  bookkeeper;  they  are  matters  of  fact,  not 
ascertainable,  ordinarily,  from  the  ledger.  The  next  asset  listed  is  the  total  of  notes 
receivable  on  hand;  this  is  found  by  comparing  the  two  sides  of  the  ledger  account.  Next 
come  the  balances  due  from  H.  E.  Runj^on  and  C.  V.  Bradley;  these  are  also  found  by 
comparing  the  two  sides  of  each  of  the  ledger  accounts. 

The  first  liability  shown  is  the  total  of  notes  payable  outstanding;  this  is  found  by 
taking  the  difference  between  the  two  sides  of  the  ledger  account.  Next  comes  the  bal- 
ance due  Dale  &  Allen,  which  is  found  by  comparing  the  two  sides  of  the  ledger  account. 

It  will  be  noted  that  the  total  assets  and  total  liabilities  are  shown  in  the  extreme 
right-hand   column.     The  difference  is  the  net    capital  of  the  business. 

The  financial  statement  of  Jan.  31  should  be  written  on  page  2  of  your  Trial  Balance 
and  Statement  Book. 

Prepare  and  rule  your  financial  statement  exactly  as  shown  in  the  model  form  unless  otherwise 
instructed.  There  are  several  forms  in  use  besides  the  form  shown.  One  places  all  the  assets  in  the  left- 
hand  column  and  all  the  liabilities  in  the  right-hand  column,  footing  them  as  in  the  trial  balance  and 
deducting  the  smaller  total  from  the  larger.  Another  makes  use  of  two  pages,  placing  the  assets  on  the 
left-hand  page  and  the  liabilities  just  opposite  on  the  right-hand  page.  Any  of  these  forms  are  good, 
but  unless  specifically  instructed  otherwise,  you  will  use  the  form  shown,  for  the  present. 

Note.  The  student  should  bear  in  mind  that  the  financial  statement  is  after  all  nothing  but  a 
problem,  in  which  it  is  required  to  find  the  net  capital  of  the  business,  all  of  the  assets  and  liabilities  being 
known.  He  must  exercise  his  judgment  in  determining  what  the  result  of  each  ledger  account  and  each 
inventory  shows,  but  once  having  determined  what  the  assets  are  and  what  the  liabilities  are,  the  problem 
of  determining  net  capital  is  a  very  simjile  one,  involving  addition  and  subtraction  only. 

Lesson  XIX 

THE  LOSS  AND  GAIN  STATEMENT 

One  of  the  two  principal  statements  which  the  bookkeeper  has  to  prepare  relates 
to  the  progress  of  the  business.  How  much  has  the  business  gained  or  lost  during  the 
period  of  time  between  two  certain  dates?  The  statement  showing  this  is  called  the 
Loss  and  Gain  Statement.  As  in  the  case  of  the  Financial  Statement,  the  facts  from 
which  it  is  compiled  are  found  in  the  different  accounts  of  the  ledger  and  the  inventories. 
Before  proceeding  to  analyze  this  statement  or  to  study  its  form,  solve  the  following 
problems.  If  you  do  this  work  thoughtfully  you  will  be  led  unconsciously  into  an  under- 
standing of  the  principles  underlying  the  Loss  and  Gain  Statement,  though  its  form  will 
still  be  unfamiliar  to  you. 

PROBLEMS 

Problem  1.  On  Jan.  1,  191 — ,  A  began  business  with  a  capital  of  $5672.60.  On  Jan.  31,  he  found 
from  the  Financial  Statement  that  the  business  was  worth  .S6134.95.  Had  the  business  gained  or  lost 
during  January?     How  was  the  amount  of  gain  or  loss  determined? 

Problem  2.  B's  gains  from  Jan.  31  to  Feb.  28  were  $650.00.  His  losses  during  the  same  period 
were  $327.60.  Did  the  business  show  a  gain  or  loss  for  February,  and  how  much?  How  was  the  amount 
of  gain  or  loss  ascertained? 

What  two  ways  are  shown,  in  the  two  problems  above,  for  determining  loss  or  gain? 

Problem  3.  C"s  Merchandise  account  showed  a  gain  of  $326.50  during  the  month  of  March,  191 — ■. 
His  [interest  account  showed  a  gain  of  $23.45.  His  expenses  for  the  month  were  $125.60,  and  his  office 
furniture,  which  he  had  invoiced  on  Feb.  28  at  $276.50,  he  now  valued  at  only  $272.00.  What  was  the 
net  gain  or  loss  of  the  business  for  March?     What  plan  did  you  use  to  determine  this? 

Problem  4.  D  began  business  on  April  1,  191 —  During  April  he  bought  $1250.00  worth  of  Mdse., 
and  on  April  30  he  had  Mdse.  remaining  on  hand  valued  at  $750.00.     The  sales  for  the  month  amounted 


58 


STATEMENTS 


to  $725.25.  The  gain  on  interest  for  tlio  montli  was  .S17.50.  The  estimated  depreciation  in  the  value 
ot  Furniture  &  Fixtures  was  $5.00.     Expenses  totaled  $126.75.     What  was  the  net  gain  or  loss  for  April? 

Problem  5.  On  May  1,  E's  Mdse.  inventory  was  $6728.50;  on  May  31  it  was  $6326.53.  No  Mdse. 
was  purchased  during  May.  Sales  for  May  were  $683.47.  The  total  cost  of  interest  during  May  was 
$15.62;  total  returns,  $29.50.  Total  expenses  for  May  were  $137.82.  The  furniture  and  fixtures  inven- 
tory on  May  1  was  $365.00;  on  May  31  it  was  $357.50.     What  was  the  gain  or  loss  for  May? 

Problem  6.  Determine  the  gain  or  loss  for  June,  191 — ,  from  the  following  facts  taken  from  F's 
business  for  the  period  between  May  31  and  Jime  30: 


Mdse.  Invty.  May  31 
Mdse.  Purchases  during  June 
Mdse.  Invty.  June  30 
Md.se.  Sales  during  June 
Interest         Dr.       $27.36, 


Cr. 


$7865 . 90 

3460.27 

9253.00 

1567.24 

43.25 


Furniture  &  Fixtures  Invty.  May  31,  $493.27 

Furniture  bought  during  June  127.50 

Furniture  &  Fixtures  Invty.  June  30  612.00 

Expenses  for  June  226. 2G 


Study  carefully  the  illustration  below  and  the  explanation  accompanying  it  and 
make  a  loss  and  gain  statement  for  F.  R.  Elliott's  business  for  January,  191 — ,  securing 
the  necessary  facts  from  your  ledger  and  from  the  Jan.  .31  inventories  as  previously  given. 


Form  of  Loss  &  Gain  Statement 


->S^^l^t^^^-l^<^ 


^^U^y. 


i^^t>'^<si-C^-.^i-ti--Ce.dy 


t^^z^^i<^&.^ 


-(a^iy. 


c<yO-~ 


'.<?i:l^U-J^ 


C  K::Cuyi-'9^,  ^^^:^i^^^, 


Gyii:^^^e-<n,<i.^y 


?  7 


oSU^. 


3/ 


?  > :  ? 


?  r:  ^f 


THE    PROOF  59 

The  model  statement  given  herewith  will  show  you  the  proper  form,  but  the  proper  amounts 
will  have  to  be  determined  by  you.  The  loss  and  gain  statement  for  January  should  be 
\\ritten  on  page  2  of  your  trial  balance  and  statement  book,  four  lines  below  the  financial 
statement. 

Explanation:  As  previously  stated,  there  are  some  accounts  which  do  not  show 
an  asset  or  a  liability.  These  show  either  gains  or  losses.  The  amount  of  gain  or  loss 
in  each  case  can  be  determined  from  the  footings  of  the  ledger  and  the  inventories.  The 
gains  are  shown  in  the  first  group.  Open  your  ledger  to  the  first  page  of  F.  R.  Elliott's 
business  (page  6),  and  consider  the  accounts  in  their  order.  Omitting  F.  R.  Elliott's 
account,  which  is  the  capital  account,  the  first  account  you  come  to  is  Mdse.  The  foot- 
ings tell  you  that  the  purchases  amount  to  $544.75,  and  the  sales,  $416.50.  It  is  apparent 
that  when  the  inventory,  $314.56,  is  taken  into  consideration,  a  gain  will  be  shown.  List 
this  account  then,  as  showing  a  gain.  The  form  is  as  follows:  First  write  the  total  cost, 
which  is  the  debit  footing  of  the  account,  and  deduct  from  it  the  amount  of  the  inventory. 
This  gives  the  cost  of  the  goods  sold.  Beneath  this  write  the  total  of  sales  (the  credit 
side  of  the  account)  and  deduct  from  it  the  cost  of  the  goods  sold  as  just  ascertained. 
The  result  is  a  gain,  which  is  carried  into  the  left-hand  money  column,  on  the  same  line 
with  the  last  item. 

The  next  account  in  the  ledger  (Furniture  and  Fixtures)  is  a  loss  or  gain  account, 
and  an  inspection  shows  that  it  exhibits  a  loss.  The  expense  account  also  shows  a  loss. 
Pass  both  of  these  for  the  present. 

The  next  account  in  the  ledger  is  the  interest  and  discount  account.  It  shows  a  gain. 
Subtract  the  debit  total  from  the  credit  total,  as  shown  in  the  form,  and  enter  the  amount 
of  the  gain  on  interest  and  discount  in  the  left-hand  money  column  below  the  amount 
of  gain  on  Mdse.,  on  the  same  line  with  the  last  item  in  the  explanatory  column. 

No  other  accounts  show  gain.     Add  the  two  items  of  gain,  as  shown  in  the  form. 

It  has  been  previously  noted  that  the  furniture  and  fixtures  account  and  the  expense 
account  each  show  a  loss.  The  loss  on  furniture  and  fixtures  is  found  thus:  First  sub- 
tract the  credit  footing  from  the  debit  footing.  This  gives  the  net  outlay  for  furniture 
and  fixtures.  Subtract  the  inventory  of  Jan.  31.  The  result  is  a  loss  and  is  written 
in  the  left-hand  money  column.  Write  beneath  this  the  loss  for  expense.  Add  the  losses 
and  write  the  total  of  losses  in  the  right-hand  money  column  beneath  the  total  gains. 
Subtract.     The  difference  is  the  net  gain  for  the  month. 


Lesson  XX 
THE  PROOF 

You  recognize  it  as  true  that  the  total  of  things  invested  equals  the  capital  of  the 
business  (the  investments  being  debits  and  the  capital  a  credit).  You  have  learned, 
further,  that  every  business  transaction  consists  of  an  equal  exchange  of  values,  the  thing 
or  things  received  being  exactly  equal  to  the  thing  or  things  disposed  of  (the  former  being 
credits  and  the  latter  being  debits).  The  logical  conclusion  is  that  the  ledger,  if  correct, 
must  always  be  in  balance. 

Starting  with  the  same  truth  (Total  of  things  invested  =capital  of  the  business)  let 
US  see  how  each  transaction  affects  the  business,  and  trace  these  transactions  from  the 


60  STATEMENTS 

journal  into  the  statements.     For  simplicity  substitute  the  word  "assets"  for  the  expres- 
sion "things  invested."     We  now  have  the  equation 

Assets  (say  $5000.00  cash)  =Capital  ($5000.00) 
Case  1.     A  transaction  may  be  a  simple  exchange  of  assets,  as  when  $1000.00  cash 
is  given  for  Mdse.  worth  $1000.00.     This  changes  only  one  side  of  the  equation  thus: 

Cash  $4000.00+ Mdse.  $1000.00  =Capital  $5000.00 

Case  2.  Instead  of  parting  with  some  asset  for  another,  we  may  receive  an  asset 
(say  Mdse.  $1000.00),  creating  a  liability  to  offset  it.  (Let  us  say  that  in  this  case  we 
become  indebted  to  Smith  for  $1000.00).  The  liabilities  are  placed  upon  the  credit  side 
(with  the  capital  account,  which  is  in  a  bookkeeping  sense  a  liability  of  the  business  to 
the  proprietor)  as  an  offset  to  the  assets,  which  as  you  have  seen  are  debits.     We  now  have 

Cash  $4000.00+ Mdse.  $2000.00  =Capital  $5000.00+ Smith  $1000.00 

Case  3.  We  may  part  with  an  asset  in  order  to  reduce  or  settle  a  liability.  Suppose 
we  pay  half  of  what  is  due  Smith  in  cash.  We  part  with  an  asset  and  reduce  a  liability. 
The  equation  now  stands 

Cash  $3500.00+ Mdse.  $2000.00  =Capital  $5000.00+ Smith  $500.00 

Case  4.  We  may  discharge  one  liability  by  the  creation  of  another.  Suppose  we 
issue  a  note  in  favor  of  Smith  to  cover  the  amount  due  him.  The  change  is  all  on  one 
side,  and  the  equation  now  stands 

Cash  $3500.00  + Mdse.  $2000.00  =Capital  $5000.00  +  Notes  Pay.  $500.00 

All  of  the  four  cases  above  assume  changes  in  assets  and  liabilities,  liut  there  has  been 
no  change  in  capital.     There  have  been  no  gains  or  losses. 

Since  business  is  conducted  for  profit,  the  four  cases  following  are  of  especial  impor- 
tance. Gains  are:  (a)  Increases  in  total  assets;  (b)  Decreases  in  total  liabilities.  Losses 
are:  (a)  Decreases  in  total  assets;  (b)  Increases  in  total  liabilities.  Mere  changes  in  assets 
and  liabilities  which  do  not  change  the  amount  of  the  capital  show  neither  gain  nor  loss. 

Case  5.  When  assets  are  increased  without  a  corresponding  increase  of  liabilities, 
a  gain  is  made.  Suppose  we  sell  for  $500.00  cash,  Mdse.  which  cost  $400.00.  This 
increases  the  cash  on  hand  $500  00  and  decreases  the  Mdse.  on  hand  $400.00.  This  being 
the  case,  the  assets  amount  to  $100.00  more  than  before.  A  gain  of  $100.00  has  been 
made,  and  the  capital  account  must  be  increased  accordingly.     The  equation  now  stands 

Cash  $4000.00  + Mdse.  $1600.00  =Capital  $5100.00  + Notes  Pay.  $500.00 
Note.     Gains  of  this  kind  are  not  recorded  separately  as  shown  above.     The  gain  on  Mdse.  is  com- 
puted in  one  sum  when  the  Mdse.  account  is  closed.     The  principle  is  the  same,  however.     A  gain  i.<! 
realized  in  fact  whenever  Mdse.  is  sold  for  more  than  it  cost,  even  though  no  separate  record  of  the  amount 
of  the  gain  is  made  at  the  time  the  sale  is  made. 

Case  6.  When  liabilities  are  decreased  without  a  corresponding  decrease  of  assets, 
a  gain  is  made.  Suppose  that  we  pay  the  note  for  $500.00  sixty  days  before  it  is  due, 
securing  a  discount  of  $5.00.  This  decreases  the  amount  of  cash  on  hand  only  $495.00, 
whereas  the  liability  on  notes  payable  is  decreased  $500.00.  A  gain  of  $5.00  has  been 
made,  and  the  capital  must  be  increased  accordingly.     The  equation  now  stands: 

Cash  $3505.00  + Mdse.  $1600.00  =Capital  $5105.00 


THE    PROOF  61 

Case  7.  When  assets  are  decreased  without  a  corresponding  tlecrcasc  in  habihties, 
a  loss  is  incurred.  Suppose  we  spend  $.50.00  for  expenses.  This  decreases  the  amount 
of  cash  on  hand.     Natural!}'  the  capital  becomes  less.     The  equation  now  stands 

Cash  $3455.00 +  Mdse.  $1600.00  =Capital  $5055.00 
Note.     The  student  understands,  of  course,  that  the  capital  account  is  not  changed  in  the  ledger 
after  every  transaction.     The  expense  account  is  kept,  and  is  peiiodically  footed  and  the  total  deducted 
from  the  capital.     The  loss  was  incurred,  nevertheless,  when  the  $50.00  was  spent. 

Case  8.  When  liabilities  are  increased  without  a  corresponding  increase  in  assets, 
a  loss  is  incurred.  Suppose  we  have  some  work  done  for  us  by  Brown  for  which  he  sub- 
mits a  bill  for  $150.00  which  we  do  not  pay  at  the  time.  We  have  incurred  a  liability 
without  increasing  our  assets,  and  there  is  a  loss.  This  loss  is  charged  to  expense,  thus 
reducing  the  amount  of  our  capital,  as  previously  shown.  The  equation  now  stands 
Cash  .$,3455.00 +  Mdse.  $1600.00  =Capital  $4905.00  +  Brown  $1.50.00 

It  will  be  noted  that  in  all  of  the  four  last  cases  a  gain  or  loss  has  occurred,  and  that 
the  amount  of  the  gain  or  loss  agreed  in  each  case  with  the  amount  of  the  increase  or 
decrease  of  some  asset  or  liability.  Since  gains  increase  capital  and  losses  decrease 
capital,  and  since  the  increase  or  decrease  of  capital  exactly  agrees  with  the  increase  or 
decrease  of  net  assets,  therefore  the  net  gain  of  a  business  always  agrees  exactly  with 
its  increase  of  net  assets,  or  the  net  loss  exactly  agrees  with  its  decrease  of  net  assets. 
The  proposition  that  Assets  =  Capital  has  no  exceptions.  The  amount  of  net  assets 
changes  from  time  to  time,  but  as  has  been  shown,  the  capital  is  also  changed  in  each 
case,  in  the  same  way,  and  by  the  sa.ne  amount. 

Classification  of  Accounts 

Every  account  exhibits  certain  facts  and  from  these  facts  a  certain  final  result  is 
determined. 

Accounts  are  divided  as  to  results  shown,  into  two  classes.  An  account  of  one  class 
■shows  as  its  result  either  an  asset  or  a  liability;  an  account  of  the  other  class  shows  either 
a  loss  or  a  gain.  We  call  the  former  financial  accounts.  The  latter  we  call  loss  or  gain 
accounts.  Every  account  with  which  you  are  familiar  at  this  time  falls  into  one  of  these 
classes  and  no  account  falls  into  both.* 

The  financial  statement  is  made  up  from  the  results  of  financial  accounts  and  inven- 
tories. The  loss  and  gain  statement  is  made  up  from  the  results  of  loss  or  gain  accounts. 
From  what  has  been  shown,  you  will  have  no  difficulty  in  deducing  the  folloi.ying  truth: 

The  net  gain  as  shown  by  the  loss  and  gain  statement  agrees  exactly  with  the  increase 
of  net  assets  as  shown  by  the  financial  statement,  or  if  a  loss  be  shown  it  agrees  exactly 
with  the  decrease  of  net  assets  which  the  financial  statement  will  show. 

The  Proof. f  On  the  same  sheet  with  your  loss  and  gain  statement,  two  or  three 
lines  below  it,  show  a  proof  the  form  of  which  (but  not  the  results)  is  shown  on  page  62. 

*As  elsewhere  explained,  inventories  are  written  in  loss  or  gain  accounts,  but  these  inventories, 
though  they  are  exhibited  in  the  accounts,  are  not  results.  An  inventory  is  not  a  result  of  an  account 
but  is  secured  by  an  independent  count  and  valuation.  In  the  Mdse.  account,  for  instance,  the  inventory 
after  being  ascertained  is  written  in  the  account  as  one  of  the  facts  necessary  for  determining  the  final 
result  of  the.  account. 

t  This  form  to  be  omitted  by  students  who  use  the  two-page  statenient  forms. 


62 


STATEMENTS 


'ACyC 


n 


PROBLEMS 

1.  Mr.  A's  capital  on  Jan.  1  was  .$5768.50.  During  January  he  gained  $2.37.50.  What  was  his 
capital  on  Jan.  .'U? 

2.  On  Feb.  1  Mr.  B  was  worth  $6725.90.  During  February  he  lost  $216.50.  What  was  he  worth 
on  Feb.  28? 

3.  Mr.  C's  financial  statement  of  Feb.  28  showed  a  net  capital  of  $7869.23.  His  financial  statement 
of  Mar.  31  showed  a  net  capital  of  $8123.65.     What  should  his  loss  and  gain  statement  for  March  show? 

4.  Mr.  D's  financial  statement  of  Mar.  31  showed  a  net  capital  of  $9267.20.  His  financial  statement 
of  Apr.  30  showed  a  net  capital  of  $8923.67.     What  should  his  loss  and  gain  statement  for  April  show? 

5.  Mr.  E's  financial  statement  of  Apr.  30  showed  a  net  capital  of  $10625.50.  His  financial  state- 
ment of  May  31  showed  a  net  capital  of  $11625.92.  His  total  gains  for  May  were  $1562.59.  What  were 
his  losses  for  May? 

6.  Mr.  F  had  total  assets  on  June  30  amounting  to  $18647.62.  His  financial  statement  of  May  31 
showed  a  net  capital  of  $11546.72.  His  loss  and  gain  statement  for  June  showed  his  net  gain  for  June 
to  be  $346.70.     What  were  his  liabilities  on  June  30? 

7.  Mr.  G's  net  capital  on  June  30  was  $12650.75.  His  net  capital  on  July  31  was  $13273.87.  His 
losses  for  July  were  $275.83.     What  was  the  total  of  his  gross  gains  for  July? 

8.  On  Aug.  31,  Mr.  H's  loss  and  gain  statement  showed  a  net  loss  for  August  of  $242.60.  His  financial 
statement  of  the  same  date  showed  assets  amounting  to  $10763.45.  His  net  capital  on  July  31  was 
$6746.32.     Wiat  was  the  total  of  his  liabilities  on  Aug.  31? 

9.  On  Aug.  31,  Mr.  J's  net  capital  was  $450.67.  His  loss  and  gain  statement  taken  Sept.  30  showed 
gains  amounting  to  $343.60  and  losses  totaling  $987.56.  His  net  capital  on  Oct.  31  was  $726.45.  What 
net  result  was  shown  by  his  loss  and  gain  statement  for  October? 

10.  Mr.  K's  net  capital  Oct.  31  was  $5467.80.  On  Nov.  15  he  added  $1250.00  to  his  investment, 
and  on  Nov.  25  he  withdrew  cash,  $78.00.  His  net  gain  for  November  was  $462.75.  His  assets  on  Nov. 
30  amounted  to  $9467.20;  what  were  his  liabilities  on  Nov.  30? 

Lesson  XXI 
CLOSING  ONE  ACCOUNT  INTO  ANOTHER 

Open  an  Expense  account  on  a  loose  sheet  of  ledger  paper.  Enter  the  following 
items  directly  in  the  account,  without  journalizing  or  posting.  Omit  explanations  except 
in  the  closing  entry: 

Jan.  1,  191 — .  Paid  by  check  for  January  rent,  $50.00.  Jan.  2.  Paid  scrubwoman  $1.50  for  work 
today.  Jan.  3.  Paid  $5.00  for  postage  stamps.  Jan.  4.  Paid  the  Daily  News  cash  for  advertising, 
$15.50.  Jan.  5.  Paid  for  letter  heads  and  envelopes,  $7.90.  Jan.  5.  Paid  the  clerk's  salary  for  the 
week,  $10.50.  Jan.  7.  Bought  postage  stamps  for  cash,  $5.00.  Jan.  8.  Paid  the  janitor  for  extra  work, 
$4. .50.  Jan.  9.  Inserted  an  advertisement  in  the  Post  for  which  we  paid  $10.75  in  cash.  Jan.  12.  Paid 
the  clerk's  salary  for  the  week,  $10.50.  Jan.  14.  Bought  $5.00  worth  of  stamped  envelopes.  Jan.  15. 
Paid  the  printer  cash  for  advertising  circulars,  $12.50.  Jan.  16.  Railroad  fare  and  other  cash  expenses 
on  business  trip,  $22.50.  Jan.  17.  Paid  cash  for  new  glass  for  broken  show-case,  $8.00.  Jan.  19.  Paid 
the  clerk's  salary  for  the  week,  $10.50.  Jan.  21.  The  Daily  News  submitted  a  bill  for  advertising,  which 
we  paid  in  cash,  $14.00.  Jan.  22.  Paid  for  new  locks  for  front  and  back  door,  $2.60.  Jan.  23.  Paid 
boy  for  distributing  circulars,  $1.50.     Jan.  26.     Paid  the  clerk's  salary  for  the  week,  $10.50. 


CLOSING    ONE    ACCOUNT    INTO    ANOTHER 


63 


After  making  all  of  the  entries  required  for  the  foregoing  transactions,  close  the 
expense  account  as  of  Jan.  31. 

QUESTIONS 
What  was  the  total  of  expen.se.s  for  Januaiy? 
How  much  of  this  was  spent  for  Advertising? 
IIow  much  was  spent  for  Stationery  and  Postage? 
How  much  was  paid  out  for  Labor  and  as  Wages? 
How  much  was  spent  for  items  other  than  Advertising,  Stationery  &  Postage,  and  Labor  &  Wages? 

Sometimes  when  it  is  considered  desirable  to  know  the  exact  cost  of  Advertising, 
Stationery  &  Postage,  Labor  &  Wages,  or  any  other  distinct  part  of  the  expense  of  a 
business,  separate  accounts  are  opened  in  the  ledger  with  these  special  titles.  Items 
belonging  in  these  special  accounts  are  entered  in  them  and  not  in  the  expense  account. 
The  title  of  expense  account  is  changed  to  General  Expense,  and  it  receives  only  those 
items  that  can  not  be  entered  in  one  of  the  special  accounts. 

On  another  sheet  of  ledger  paper,  open  four  accounts,  as  follows,  giving  each  one- 
fourth  of  a  page:  Advertising,  Stationery  &  Postage,  Labor  &  Wages,  General  Expense. 
Number  the  accounts  1,  2,  3  and  4,  as  if  each  were  on  a  separate  page.  Make  the  entries 
in  these  four  accounts  for  the  January  transactions  previously  given,  entering  each  item 
directly  in  the  account  in  which  it  belongs.  (The  item  on  Jan.  23  should  be  charged  to 
Advertising.) 

If  these  four  accounts  were  each  closed  independently,  each  would  show  a  loss.  Each 
is  an  expense  account,  but  in  each  is  recorded  only  a  part  of  the  expenses.  In  order  to 
find  the  total  of  all  expenses  for  the  month  it  would  be  necessary  to  add  the  four  results. 
This  result  is  secured  in  bookkeeping  by  dosing  into  General  Expense,  which  we  call  a. 
principal  account,  the  results  of  the  other  accounts,  which  we  call  subordinate  accounts. 
Before  considering  the  process  by  which  this  is  accomplished,  study  the  following  diagram: 


Subordinate  Accounts 


Principal  Account 


Advertising,  $100.00 


Stat'y  &  Post.,  $60.00 


Labor  &  Wages,  $150.00 


General  Expense 
Already  entered,     $90.00 

Closed  from  Adv'g  ale  100. 00 
Closed  from  S.  ti  P.  ale  60  UU 
Closed  Irom  L.  &  W .  ale      1 M .  Ul) 


Supposing  that  the  results  of  the  aliove  accounts  ai'e  as  shown  in  the  diagram,  it  is 
apparent  that  when  the  subordinate  accounts  are  closed  and  their  results  transferred  to 
the  principal  account,  General  Expen.se,  that  account,  which  now  shows  a  loss  of  $90.00, 
will  then  show  a  Ic^s  of  $400.00,  which  sum  represents  the  total  expense  of  the  business. 

Process  of  Closing  the  Subordinate  Accounts.  Foot  the  debit  side  of  the  advei- 
tising  account.  Transfer  the  footing  from  the  advertising  account  to  the  general  exjiense 
account,  as  follows:     Enter  on  the  credit  side  of  the  advertising   account,  in  red  ink,  the 


64 


STATEMENTS 


amount  transferred,  with  the  explanation  "  General  Expense,"  which  shows  the  account  to 
which  the  amount  is  transferred.  This  red  ink  entry  should  be  dated  to  indicate  the 
day  the  transfer  was  made  (in  this  case,  Jan.  31)  and  the  folio  column  should  show  the 
ledger  page  to  which  the  amount  was  transferred  (L4).  The  amount  transferred  should 
then  be  entered  in  the  general  expense  account,  in  black  ink,  with  the  same  date  (Jan. 
31)  and  this  entry  should  show  in  the  folio  column  the  ledger  page  from  which  the 
entry  was  posted  (LI). 

The  two  entries  you  have  made,  one  on  the  debit  side  of  the  general  expense  account 
and  another  of  exactly  the  same  amount  on  the  credit  side  of  the  advertising  account, 
have  not  disturbed  the  balance  of  the  ledger.  Rule  and  foot  the  advertising  account; 
its  two  sides  just  balance  and  it  is  now  disposed  of  as  far  as  your  bookkeeping  up  to  date 
is  concerned. 

The  effect  of  this  procedure  has  been  to  transfer  to  the  debit  side  of  the  general 
expense  account  the  exact  amount  which  formerly  appeared  on  the  debit  side  of  the 
advertising  account. 


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CLOSING    THE    LEDGER 


65 


Close  Stationery  &  Postage  and  Labor  &  Wages  in  exactly  the  same  way.  When 
all  three  accounts  have  been  thus  closed  into  General  Expense,  the  latter  will  contain  all 
the  expenses  of  the  business  for  the  month,  its  last  three  items  being  in  condensed  form. 

'  Lessox  XXII 

CLOSING  THE  LEDGER 

If  your  financial  statement  and  your  loss  and  gain  statement  for  F.  R  Elliott's  busi- 
ness have  been  approved,  you  are  now  ready  to  close  the  ledger. 

Closing  Financial  Accounts.  Close  the  following  accounts  with  a  balance:  Cash, 
Notes  Receivable,  Notes  Payable.  Personal  accounts,  unless  the  debit  and  credit  sides 
are  equal,  are  left  open.  You  are  already  familiar  with  the  process  of  closing  these  accounts. 
Do  not  fail  to  bring  all  balances  down  in  black  ink,  in  each  case  onto  the  side  opposite 
that  on  which  the  red  ink  entry  appears.  Use  the  date  Jan.  31  for  every  closing  entry 
and  bring  all  balances  down  as  of  Feb.  1. 

It  should  be  noted  that  in  each  case  the  red  ink  entry  on  one  side  is  exactly  offset  by  the  black  ink 
entry  brought  down  onto  tlie  opposite  side.  This  preserves  the  balance  of  the  ledger  and  leaves  the  prepon- 
derance of  balance  on  each  particular  account  just  the  same  as  it  was  before  the  closing  was  effected. 

Closing  Loss  or  Gain  Accounts.  Close  the  following  accounts  into  the  loss  and 
gain  account  which  you  have  already  opened  on  page  7  of  your  ledger,  after  entering 
the  inventories  in  red  ink:  Merchandise,  Furniture  &  Fixtures,  Expense,  Interest.  Use 
the  date  Jan.  31  for  all  closing  entries,  and  bring  all  inventories  down  as  of  Feb.  1.  These 
four  loss  or  gain  accounts  are  subordinate  to  Loss  &  Gain  and  are  closed  into  it  by  the 
process  explained  in  the  special  exercise  in  Lesson  XXI.  The  loss  and  gain  account  is 
in  turn  closed  into  the  proprietor's  account.     Study  the  following  diagram: 


Merchandise 


Furn.  &  Fix 


Expense 


Loss  &  Gain 


F.  R.  Elliott 


In  the  special  exercise  in  closing.  Lesson  XXI,  there  were  entries  on  one  side  of  the 
subordinate  account  only,  in  each  case.     When  there  are  entries  on  both  sides,  as  in  F.  R. 


66  STATEMENTS 

Elliott's  interest  account,  the  process  of  closing  is  the  same  as  that  formerly  studied,  but 
the  amount  transferred  is  the  difference  between  the  two  sides.  The  red  ink  entry  is 
always  made  on  the  smaller  side  of  the  account  closed,  thus  balancing  it;  and  the  amount 
transferred  to  Loss  &  Gain  is  entered  therein  in  black  ink  on  the  side  opposite  that  on 
which  the  red  ink  entry  was  made,  thus  preserving  the  balance  of  the  ledger.  The  result 
of  the  transfer  is  to  take  to  the  debit  or  credit  side  as  the  case  may  be,  of  the  loss  and 
gain  account,  the  exact  amount  by  which  that  side  of  the  subordinate  account  exceeded 
the  other  before  the  closing.  Ultimately,  all  the  separate  losses  and  gains  are  gathered 
into  Loss  &  Gain,  the  result  of  which  then  exhibits  the  net  loss  or  net  gain  of  the  business 
for  the  period  of  time  since  the  ledger  was  last  closed,  or;  in  this  case,  since  the  beginning 
of  business. 

Since  the  various  loss  or  gain  accounts  are  being  closed  into  the  loss  and  gain  account, 
the  explanation  "Loss  &  Gain"  should  be  used  in  closing  each  of  them  and  the  ledger 
page  upon  which  the  loss  and  gain  account  is  to  be  found  should  be  written  in  the  folio 
column.  In  making  each  entry  in  the  loss  and  gain  account,  use  as  an  explanation  the 
name  of  the  account  transferred,  and  enter  in  the  folio  column  the  ledger  page  on  which 
the  closed  account  is  to  be  found. 

Note.  Up  to  this  point  all  entries  in  the  ledger  have  been  transferred  from  the  same  book  (the 
journal),  and  for  this  reason  nothing  has  been  needed  in  the  folio  column  except  the  page  number,  as  it 
haS  always  been  understood  that  the  entry  originated  in  the  journal.  The  entries  in  the  loss  and  gain 
account,  which  do  not  originate  in  the  journal,  but  are  transferred  from  another  page  of  the  ledger,  should 
be  postmarked  so  as  to  indicate  that  they  came  from  the  ledger.     The  initial  L.  is  used  to  indicate  this. 

Closing  an  Account  Which  Has  an  Inventory.  If  the  account  has  a  resource 
inventory  (whicli  is  the  only  kind  of  an  inventory  you  know  anything  about  at  this  time) 
the  inventory  is  entered  on  the  credit  side  of  the  account  before  closing  and  after  closing 
it  is  brought  down  upon  the  debit  side.  This  is  fully  treated  and  illustrated  in  the  exercise 
on  the  Mdse.  account  in  Chapter  I.  It  will  be  observed  that  the  red  ink  inventory  entered 
before  closing  and  the  black  ink  inventory  brought  down  are  of  the  same  amount  and 
on  opposite  sides  of  the  ledger,  thus  preserving  the  equilibrium  of  the  ledger. 

Unless  there  are  unposted  items  a  correct  ledger  is  never  out  of  balance.  For  every  debit 
(or  debits)  there  is  a  credit  {or  credits)  of  equal  amount.  For  every  credit  (or  credits)  there 
is  a  debit  {or  debits)  of  equal  amount.  This  is  true  of  closing  entries  as  irell  as  of  entries 
for  current  transactions. 

The  separate  losses  and  gains  closed  into  tlie  loss  and  gain  account  should  correspond 
in  detail  with  the  separate  losses  and  gains  shown  by  the  loss  and  gain  statement. 

Close  the  loss  and  gain  account  into  the  account  of  the  proprietor,  F.  R.  Elliott.  The 
amount  transferred  should  be  the  same  as  the  net  gain  shown  by  the  loss  and  gain  state- 
ment. In  making  the  red  ink  entry  in  the  loss  and  gain  account  use  as  an  explanation 
the  name  of  the  account  to  which  the  amount  was  transferred  (F.  R.  Elliott)  and  write 
iii  the  folio  column  the  ledger  page  to  which  the  amount  is  transferred.  In  making  the 
black  ink  entry  in  F.  R.  Elliott's  account  use  as  an  explanation  the  name  of  the  account 
from  which  the  amount  is  transferred  (Loss  &  Gain)  and  write  in  the  folio  column  the 
ledger  page  from  which  the  amount  is  transferretl. 

Close  F.  R.  Elliott's  account  with  a  balance.  This  balance  should  agree  with  the 
net  capital  shown  by  the  financial  statement. 


Loss  OR  Gain  Accounts,  Closed 


67 


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proprietor's  account,  if  desired,  instead  of  the  explanation  "Balance"  as  shown  in  the  above  form. 

BALANCE  OF  BALANCES 

The  ledger  was  in  balance  before  closing.  The  equality  of  debit  and  credit  was  not 
departed  from  in  a  single  instance  in  making  the  closing  entries.  Whenever  any  account 
was  ruled,  equal  debit  and  credit  totals  were  eliminated.  It  follows  logically  that  the 
ledger  is  now  in  balance  after  closing.  To  test  this,  take  a  balance  of  balances  in  the 
form  shown  below.  Note  that  although  the  personal  accounts  were  left  open,  the  balances 
only  are  shown.     Write  this  on  page  3  of  your  trial  balance  and  statement  book. 


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If  the  total  of  deljit  balances  does  not  exactly  equal  the  total  of  credit  balances,  some 
mistake  has  been  made.     To  find  it,  check  yuur  balance  of  balances  with  the  assets  and 


SUMMARY    AND   CLASSIFICATION    OF    ACCOUNTS  69 

liabilities  shown  by  your  financial  statement.  The  debit  balances  should  correspond  in 
detail  with  the  assets  shown  in  the  statement.  The  credit  balances  should  correspond  in 
detail  with  the  liabilities  shown  by  the  statement  and  the  net  capital  (which,  as  has  been 
remarked,  is  in  a  bookkeeping  sense  a  theoretical  liability).  Even  though  your  balance 
of  balances  shows  the  ledger  to  be  in  balance,  it  will  be  well  to  check  it  with  your  financial 
statement,  as  this  will  help  you  to  see  the  resemblance  that  should  exist  between  them. 

Tlie  loss  or  gain  accounts  have  all  been  closed  into  Loss  &  Gain,  and  that  account  closed 
into  the  proprietor's  account.  Since  the  net  gain  must  agree  with  the  increase  of  net 
assets,  as  you  have  learned,  it  is  apparent  that  the  proprietor's  investment  (net  assets 
at  the  beginning)  plus  his  gain  (increase  of  net  assets)  must  equal  his  net  assets  at  present, 
as  shown  by  the  financial  statement;  or,  in  other  words,  the  balance  of  the  proprietor's 
account,  or  capital  account,  must  equal  the  net  capital  shown  by  the  financial  statement. 
See  the  "proof"  on  page  62. 

Since  the  ledger  is  in  balance  after  closing,  the  balances  of  the  different  accounts 
are  included  in  the  next  trial  balance. 

Lesson  XXIII 

SUMMARY  AND  CLASSIFICATION  OF  ACCOUNTS 

The  ledger  is  the  book  of  accounts.  Each  account  in  it  shows  the  result  of  some  one 
part  of  the  business.  Accounts  are  of  two  classes  as  to  result  shown:  (a)  Financial 
Accounts;  (b)  Loss  or  Gain  accounts. 

Financial  accounts  are  those  which  individually  show  the  condition  of  certain  parts 
of  the  business;  collectively  they  show  the  condition  of  the  business  as  a  whole.  The 
result  of  an  account  of  this  class  is  a  balance,  and  when  closed  it  is  closed  with  a  balance, 
which  is  either  an  asset  or  a  liability.*  Cash,  Notes  Receivable,  Notes  Payable,  and  per- 
sonal accounts  belong  in  this  class.  The  results  of  the  separate  financial  accounts,  together 
with  the  inventories,  constitute  the  data  from  which  the  financial  statement  is  constructed. 

Assets  are  things  of  value  belonging  to  the  business.  An  asset  may  be  cash,  property, 
or  claims  against  others.  Claims  against  others  may  be  written  (notes  receivable)  or 
on  account.     Liabilities  are  debts.     They  may  be  written  (notes  payable)  or  on  account. 

Loss  or  gain  accounts  are  those  which  individually  exhibit  as  a  result  the  progress 
(loss  or  gain)  of  some  particular  part  of  the  business;  collectively  they  show  the  net  loss 
or  net  gain  of  the  business  as  a  whole.  Accounts  of  this  kind  close  with  either  a  loss  or 
a  gain.f  Merchandise,  Furniture  &  Fixtures,  Expense,  and  Interest  are  accounts  which 
belong  in  this  class;  there  are  many  others. 


*The  Cash  account  must  show  an  asset,  unless  it  closes  without  a  balance.  The  same  is  true  of 
Notes  Receivable.  Notes  payable  must  show  a  liability,  if  anything.  A  personal  account  may  show 
either  an  asset  or  a  liability. 

fThe  expense  account  always  shows  a  loss.  The  Mdse.  account  ought  to  show  a  gain  in  every  case. 
A  property  accouat  will  usually  show  a  loss,  because  property  is  subject  to  wear  and  tear.  Interest,  in 
an  ordinary  business,  is  much  more  likely  to  show  loss  than  gain.  Except  as  to  the  expense  account, 
however,  there  can  be  no  certainty  (as  far  as  the  bookkeeper  may  know)  that  the  result  will  be  one  way 
or  the  other.  Other  loss  or  gain  accounts  may  be  kept  such  as  the  character  of  the  business  may 
require  or  the  desires  of  the  proprietor  may  suggest.  In  this  beginning  course,  only  a  few  typical  loss  or 
gain  accounts  are  kept. 


70  STATEMENTS 

While  Cash,  Notes  Receivable,  Notes  Payable  and  personal  accounts  cover  the  financial 
accounts  usually  kept  in  an  ordinary  mercantile  business,  the  loss  or  gain  accounts  vary 
widely  in  different  lines  of  business.  The  expense  account,  as  you  learned  in  a  previous 
chapter,  is  often  subdivided,  many  subordinate  expense  accounts  being  kept  in  connection 
with  a  general  expense  account.  In  a  mercantile  business,  a  merchandise  account  is 
always  kept,  but  it  may  be  kept  under  some  specific  title,  such  as  Boots  &  Shoes,  Groceries, 
etc.;  it  may  be  subdivided  to  show  separate  results  for  separate  departments,  such  as 
Green  Groceries,  Dried  and  Canned  Goods,  Staples,  Bakery  Goods,  Meats,  and  Sundries, 
all  closing  into  a  general  Mdse.  account;  or  it  may  be  subdivided  into  Mdse.  Purchases, 
Mdse.  Sales,  and  Mdse.-General;  or  in  any  other  way  which  suits  the  particular  require- 
ments of  the  business  or  the  wishes  of  the  proprietor.  What  property  accounts  are  kept 
will  depend  primarily  upon  what  property  is  owned  and  secondarily  upon  how  the  pro- 
prietor may  wish  to  classify  it;  he  may  consider  it  perfectly  satisfactory  to  keep  it  all  in 
one  general  Property  account,  or  he  may  wish  to  keep  a  number  of  independent 
accounts. 

Inventories  must  be  taken  into  consideration  in  finding  the  results  of  loss  or  gain 
accounts.  Whether  or  not  there  is  an  inventory  for  any  particular  account  is  a  matter 
of  fact,  and  what  the  amount  of  that  inventory  is,  is  a  matter  of  fact  or  opinion.  The 
books  do  not  show  these  facts  as  to  inventories.  Their  existence  must  be  known,  and 
their  amount  must  be  determined  by  count  and  valuation,  estimation,  or  computation, 
as  the  case  may  be.  You  will  learn  more  about  inventories  later,  and  in  the  meantime 
inventory  figures  will  be  given  whenever  necessary. 

The  results  of  the  loss  or  gain  accounts  constitute  the  data  from  which  the  loss  and 
gain  statement  is  constructed. 

The  financial  statement  shows  the  separate  assets  and  liabilities  of  the  business  and 
from  these  the  condition  of  the  business  at  the  time  of  taking  the  statement  is  determined. 
If  the  assets  exceed  the  liabilities,  the  amount  of  the  excess  of  assets  is  the  net  capital, 
or  net  assets  of  the  business.  Should  the  habilities  exceed  the  assets,  the  business 
would  obviously  be  unable  to  pay  its  debts — it  would  be  insolvent.  The  result  of  the 
financial  statement  would  be  a  net  msolvency. 

The  loss  and  gain  statement  shows  the  separate  losses  and  gains  of  the  business  and 
from  these  the  net  loss  or  net  gain  of  the  business  is  determined.  This  net  loss  or  net 
gain  is  for  the  period  of  time  between  the  last  closing  of  the  books  and  the  date  of  the 
statement.  If  the  gains  exceed  the  losses,  a  net  gain  is  shown  for  the  period.  If  the  losses 
exceed  the  gains,  a  net  loss  is  shown  for  the  period. 

The  net  gain  of  a  business  always  corresponds  exactly  with  the  increase  of  net  assets, 
as  is  fully  proved  in  Lesson  XX.  Consequently  when  the  net  gain  for  a  certain  period  is 
added  to  the  net  capital  at  the  beginning  of  the  period,  the  result  is  the  net  capital  at 
the  end  of  the  period,  provided  the  proprietor  has  not  increased  his  investment  nor  with- 
drawn any  part  of  it. 

The  net  loss  of  a  business  always  corresponds  exactly  with  the  decrease  of  net  assets. 
Consequently,  when  the  net  loss  for  a  certain  period  is  subtracted  from  the  net  capital 
at  the  beginning  of  the  period,  the  result  is  the  net  capital  at  the  end  of  the  period,  pro- 
vided there  have  been  no  additions  to  or  withdrawals  from  investment  in  the  meantime. 
Should  the  net  loss  for  the  period  exceed  the  net  capital  at  the  beginning  of  the  period, 
the  result  would  be  an  insolvency. 


EXERCISES    IN    MAKING    STATEMENTS  71 

Should  there  be  an  insolvency  at  the  beginning  of  a  period,  instead  of  a  net  capital, 
the  gain  for  the  period  would  decrease  the  amount  of  the  insolvency;  if  there  were  a  loss 
for  the  period,  the  amount  of  the  insolvency  would  be  increased.  If  the  gain  for  the 
period  were  larger  than  the  insolvency  at  the  beginning  of  the  period,  the  result  would 
be  the  net  capital  at  the  end  of  the  period. 

Loss  and  gain  statements  are  usually  made  annually  or  semi-annually  in  business; 
if  made  oftener,  the  burden  of  extra  work  would  usually  be  too  great  considering  the 
benefits  derived;  if  made  less  frequently,  the  proprietor  would  not  be  kept  in  touch  with 
the  condition  and  progress  of  the  business  as  closely  as  he  should  be.  Such  a  statement 
could  be  made  every  month  if  desired. 

It  is  customary  to  close  the  ledger  after  taking  a  loss  and  gain  statement.  If  this 
were  not  done,  the  work  would  have  to  be  done  over  again  when  the  next  statement  was 
made.  Suppose  that  a  loss  and  gain  statement  were  made  on  Jan.  31,  for  instance,  cover- 
ing the  period  from  Jan.  1  to  Jan.  31,  and  the  books  were  not  closed.  If  another  loss  and 
gain  statement  were  made  on  Feb.  28,  this  statement  would  have  to  cover  the  period  from 
Jan.  1  to  Feb.  28.  Naturally  more  time  and  labor  would  be  required  to  prepare  a  state- 
ment covering  two  months  than  one.  It  is  also  apparent  that  the  figures  for  January 
would  have  been  gone  over  twice. 

The  ledger  is  closed  as  follows: 

First:  The  financial  accounts  (all  except  the  personal  accounts*)  are  closed,  the 
balances  being  brought  down. 

Second-     The  loss  or  gain  accounts  are  closed  into  Loss  &  Gain. 

Third:     The  loss  and  gain  account  is  closed  into  the  proprietor's  account. 

Last:     The  proprietor's  account  is  closed  with  a  balance. 

Closing  the  loss  or  gain  accounts  in  the  ledger  is  sometimes  accomplished  through  journal  entries. 
To  illustrate:  Instead  of  closing  the  expense  account  with  a  red  ink  entry  on  the  credit  side  and  making 
a  black  ink  entry  of  the  same  amount  on  the  debit  side  of  the  loss  and  gain  account  an  entry  is  made  in 
the  journal  debiting  the  loss  and  gain  account  and  crediting  the  expense  account.  When  this  entry  is 
posted  it  is  found  that  the  expense  account  balances,  and  it  is  ruled  to  close.  The  debit  item  being  posted 
to  the  los.s  and  gain  account,  the  condition  of  the  ledger  is  the  same  as  though  the  closing  had  been  done 
directly  in  the  ledger,  as  is  the  more  general  custom.  State  what  you  consider  to  be  the  advantages  and 
disadvantages  of  both  plans.     Closing  through  the  journal  is  more  fully  discussed  on  page  125. 

Before  making  any  further  entries  in  it,  the  balance  of  the  ledger  should  be  verified 
either  by  taking  a  balance  of  balances,  or  by  checking  its  balances  as  they  stand  with 
the  separate  assets  and  liabilities  shown  by  the  financial  statement. 

Lesson  XXIV 
EXERCISES  IN  MAKING  STATEMENTS 

Exercise  1 

From  the  following  amounts  taken  from  D.  B.  Fisk's  ledger  and  inventories,  prepare  a  financial 
statement  as  of  Jan.  SI,   191 — .     Also  make  a  loss  and  gain  statement  and  proof.     Use  loose  sheets. 


*Some  bookkeepers  prefer  to  leave  the  notes  receivable  and  notes  payable  accounts  open,  ruHng  them 
only  when  they  balance,  or  when  they  are  to  be  forwarded,  treating  them  in  this  respect  just  as  personal 
accounts  are  treated. 


72 


statements 
Footings  from  D.  B.  Fisk's  Ledger,  Jan.  31,  191- 


D   B.  Fisk,  Proprietor 
Furniture  &  Fixtures. 

Merchandise 

Interest 

Expense 

Cash 

Notes  Receivable.  ... 

C.  A.  Faust 

H.  J.  Holm 

Notes  Payable 

Miner  &  Co 

Stephens  &  Hill 


500 

2390 

43 

275 

3203 

1900 

125 

56 


560 
69 


459 
1159 
520 


Inventories:     Mdse.,  $2090.00.     Furniture  &  Fixtures,  $485.00. 

If  the  losses  exceed  the  gains,  the  result  is  a  net  loss.     In  preparing  the  proof  this  must  be  deducted 
from  the  investment  in  order  to  find  the  net  capital  Jan.  31. 


Exercise  2 

From  the  balances  and  footings  following,  taken  from  the  ledger  of  C.  V.  Rousch,  Feb.  28,  191 — , 
and  the  inventories  below,  prepare  statements.  Write  a  proof  at  the  bottom  of  the  loss  and  gain 
statement. 

Footings  fkom  C.  V.  Rousch's  Ledger,  Feb.  28,  191 — • 


C.  V.  Rousch,  Proprietor 

Real  Estate 

Merchandise 

Expense 

Interest 

Cash 

Notes  Receivable 

H.  A.  Wasson 

Notes  Payable 

J.  R.  Hadley 


10000 

4256 

272 

43 

2405 

500 

245 

50 


17773 


55 


14134 
1253 


10 
1000 


725 
650 


17773 


55 


Inventories:  Real  Estate,  $9875.50;  Mdse.,  $3579.36;  interest  due  on  our  notes  payable, 
$16.79. 

Note  that  the  interest  inventory  is  an  inventory  of  debt.  This  is  called  a  liability  in  th^  financial 
statement.     It  is  added  to  the  debit  side  of  the  interest  account  in  making  the  loss  and  gain  statement. 

Exercise  3 
Footings  from  H.  T.  Adams'  Ledger,  Mar.  31,  191 — 


H.  T.  Adams 

Real  Estate 

Merchandise 

Expense 

Interest 

Cash 

Notes  Receivable   .  . 
Accounts  Receivable 

Notes  Payable 

Accounts  Payable. . . 


8500 
43000 

1260 

320 

36000 

6460 

5994 


12500 
44000 


254 
33000 


6000 
5780 


THE    PROBLEMS    OF    BOOKKEEPING 


73 


Observe  that  the  personal  accounts  are  not  listed  separately.  The  accounts  receivable  have  appar- 
ently been  scheduled  separately  and  the  total  only  listed  in  the  above  trial  balance.  The  same  is  true 
of  the  accounts  payable. 

Inventories:  Store  and  Lot  (Real  Estate),  $8000.00;  Mdse.,  $6000.00;  Unexpired  Insurance  (which 
had  been  charged  to  Expense),  $125.00. 

Note.  Unexpired  insurance  is  a  resource  inventory.  It  represents  something  of  value  which  we 
still  own,  as  it  has  never  been  used. 

Note.  It  is  not  to  be  inferred  that  it  is  customary  in  business  to  prepare  statements  from  the  trial 
balance  and  inventories,  for  such  is  not  the  case.  Careful  accountants  prefer  to  go  back  to  the  ledger  for 
the  information,  thus  avoiding  one  chance  of  error.  Furthermore,  the  trial  balance  which  is  taken  by 
differences  (the  customary  plan)  lack  the  necessary  information  as  to  amounts  of  purchases  and  sales  of 
Mdse.,  totals  of  costs  and  returns  on  interest,  etc. 

The  Problems  of  Bookkeeping 

Bookkeeping  consists  of  problems.  Each  account  constitutes  a  separate  problem. 
The  results  of  these  separate  problems  (and  the  inventories)  furnish  the  data  for  the 
construction  of  larger  problems,  which  in  turn  furnish  the  data  necessary  for  the  solution 
of  the  "grand  problem,"  which  is  the  present  capital  of  the  business.  The  outline 
below  shows  the  relation  of  these  problems  to  each  other  and  to  the  grand  problem. 


GRAND  PROBLEM 


Present 
Capital 


SUB- PROBLEMS 


ACCOUNT  PROBLEMS 


a.  Assets   today . 

b.  Debts    today . 


r  Separate  Assets  shown  by  Accounts 
[  Inventories  (not  usually  Bkpg.  Probs.) 

f  Separate  Debts  shown  by  Accounts 
1^  Inventories  (not  usually  Bkpg.  Probs.) 


C.    Net   Capital  before   closing .  .  .  .    /  shown  by  Proprietor's  Account 

d.  Net   Gain    (or   Loss)    since    last  J  Separate  Gains  shown  by  Accounts 
closing [  Separate  Losses  shown  by  Accounts 


Explanation.  The  results  of  the  "account  problems,"  combined  with  the  inventories, 
constitute  the  data  for  the  "sub-problems."  The  result  of  the  "grand  problem"  can 
be  determined  from  the  data  furnished  by  sub-problems  a  and  b  or  from  the  data 
furnished  by  sub-problems  c  and  d,  and  in  double  entry  bookkeeping  it  is  determined  in 
both  ways,  the  result  being  the  same  in  either  case. 


CHAPTER  V 

SET  TWO 

Lesson  XXV 
TRANSACTIONS  FOR  FEBRUARY— RETAIL 

Following  are  two  months'  transactions.  Enter  the  transactions  for  February  in 
your  journal,  post,  and  attend  to  the  other  duties  of  the  bookkeeper,  proceeding  as  follows: 

1.  Journalize  the  transactions  of  Feb.  1  to  Feb.  13  inclusive.  2.  Post  the  foregoing. 
3.  Take  a  trial  balance  as  of  Feb.  13.  4.  Journalize  the  transactions  of  Feb.  16  to  27 
inclusive.  5.  Post  the  foregoing.  6.  Take  a  trial  balance  as  of  Feb.  27.  7.  Prepare 
statements.     8.  Close  the  ledger.     9.  Take  a  balance  of  balances. 

Unless  your  teacher  shall  instruct  otherwise,  have  your  work  approved  at  each  of 
the  above  points  before  proceeding  with  the  next  step. 

The  accounts  kept  and  the  number  of  lines  allowed  for  each,  in  addition  to  the  line 
for  the  heading  and  the  line  for  the  year  date,  are  as  follows: 

Fifth  Page 
Mrs.  C.  S.  James,  6432  Yale  Ave. 
Mrs.  T.  J.  Foster,  7221  Lowe  Ave. 
South  Side  Bakery,  7920  Normal  Ave. 

Sixth  Page 
Mrs.  Geo.  E.  Weeks,  5429  Drexel  Boul. 
Notes  Payable 

Jas.  P.  Smith  &  Co.,  59  S.  Water  St. 
Sprague,  Warner  &  Co.,  600  W.  Erie  St. 

The  headings  for  the  above  accounts  may  be  written  in  the  ledger  at  this  time,  or  you  may  do  this 
just  before  posting  on  Feb.  13,  as  your  teacher  shall  direct. 

Condition  of  the  Ledger  at  Beginning 

Feb.  1,  191 — .  A.  B.  Moore  is  engageil  in  business  at  6327  Englewood  Ave.  On 
this  date  his  assets  and  debts  are  as  follows:  Cash  on  hand,  .11200.75;  real  e.state,  $7500.00; 
furniture  and  fixtures,  $826.50;  horses  and  wagon.s*,  $1627. .50;  Mdse.  Invty.,  $4326.75;  he 
holds  a  30-day  note  against  F.  A.  Bright,  dated  Jan.  17,  for  $2.50.00,  with  interest  at  6%t; 
and  accounts  are  due  him  as  follows:  Mrs.  C.  S.  James,  $27.50;  Mrs.  T.  J.  Foster,  $36.25. 
There  is  outstanding  against  him  a  60-day  note  in  favor  of  Dan  J.  Hartnett&Co.  for  $263.50, 
dated  Jan.  19,  with  interest  at  6%t;  and  he  owes  Jas.  P.  Smith  &  Co.  on  account  $275.00. 

The  foregoing  assets  and  liabilities  should  show  on  A.  B.  Moore's  ledger;  and  as  you 
have  learned,  the  balance  of  the  capital  account  should  be  the  difference  between  the 
assets  and  liabilities.     Make  the  necessary  entries  in  the  ledger,  dating  all  of  them  Feb.  1, 

*If  the  delivery  service  were  by  Auto-truck  or  Delivery  Auto,  an  account  could  be  opened  with 
either  of  these  headings,  instead  of  the  Horse  &  Wagon  account.  At  the  present  time,  automobile  delivery 
service  by  retail  Houses  is  mostly  confined  to  Houses  ha\'ing  a  large  number  of  long  hauls. 

fStrictly  speaking,  accrued  interest  should  be  computed  on  both  the  note  receivable  and  the  note 
payable.  Since  these  items  amount  to  about  the  same,  however,  they  are  here  omitted  for  the  sake  of 
simplicity  and  in  order  not  to  confuse  the  student  at  this  early  stage. 

74 


First  Page 

A.  B.  Moore, 

Proprietor 

11  lines 

Real  Estate 

7  lines 

Furniture  &  Fixtures 

10  lines 

Horse  &  Wagon 

9  lines 

Second  Page 

Merchandise 

1  page 

Third  Page 

Expense 

15  lines 

Interest 

12  lines 

Loss  &  Gain 

12  lines 

Fourth  Page 

Cash 

30  lines 

Notes  Receivable 

11   lines 

13 

lines 

13 

lines 

13 

lines 

9 

lines 

9 

lines 

10 

lines 

9 

lines 

TRANSACTIONS    FOR    FEBRUARY 


75 


in  each  case  using  tlie  explanation  "Balance"  or  "Inventory,"  as  may  be  proper.  When 
this  has  been  done,  test  the  balance  of  the  ledger  before  proceeding  further. 

Transactions — Set  Two 
191—. 
Feb.  1.     Sold  to  Mrs.  C.  S.  James,  6432  Yale  Ave.,  on  account:* 


2  lbs.  golden  Rio  coffee,  at  1.3^ 
1  lb.  Orange  Pekoe  Ceylon  tea 
1  tin  Bakers'  Breakfast  cocoa 
1  bottle  India  curry  powder 


$0.26 


$1.45 


The  explanation  in  the  journal  consists  of  a  list  of  the  items  and  jirices  as  shown  above.  The  total 
shows  in  the  money  columns  only.  The  words  "Sold  on  account"  may  be  omitted  as  superfluous,  since 
the  journal  entry  shows  clearly  what  has  taken  place. 

Feb.  3.     Sold  on  account  to  Mrs.  T.  J.  Foster,  7221  Lowe  Ave.: 
2  lbs.  Penang  cloves,  at  55^  $1 .  10 

2  cans  Royal  Dutch  mustard,  at  12^  .24 

2  bottles  vanilla,  at  20s!  .40  $1.74 

Feb.  4.  Received  a  check  from  C.  S.  James  for  .S27.50,  in  settlement  of  the  account 
against  Mrs.  C.  S.  James  up  to  Feb.  1.     You  understand  that  this  check  is  received  as  cash. 

FORM    OF    CHECK 


FIRST  NATIONAL  BANK 

Pay  to  the  order  of      0,  C^.  ^y~??^/-r.-<i^    - — ' ir 


(n^:^J,Jy^^^€=d^^^^^^  Y  ^,. 


— '    Dollars. 


No,  ^.^r. 


oti^.^-y.. 


^-A-'T^-T^^ 


A  check  is  a  demand  to  pay  money,  drawn  upon  a  bank  by  a  person  who  has  funds 
in  the  bank  against  which  he  is  entitled  to  draw,  made  payable  to  a  certain  person  named 
therein,  or  to  bearer.  Checks  made  payable  to  a  certain  person  or  his  order  must  be 
endorsed  by  the  person  when  they  are  transferred  by  him  to  another.  Checks  made 
payable  to  bearer  need  not  be  endorsed  in  order  to  be  valid  in  the  hands  of  a  transferee, 
but  often  they  are  endorsed  nevertheless;  banks  usually  require  endorsement  of  all  checks 
deposited  with  them,  whether  they  are  drawn  in  favor  of  some  certain  person  or  in  favor 

*For  variable  price  lists,  see  page  167.  Make  a  copy  of  the  prices  in  the  list  assigned  you,  and 
keep  it  before  you  for  reference. 


76  SET  TWO 

of  the  bearer.  In  the  foregoing  illustration  Wm.  Wilson,  the  drawer,  orders  the  First 
National  Bank  to  pay  $1800.00  to  E.  C.  Davis  or  some  one  Davis  may  name. 

Feb.  6.  Bought  from  Jas.  P.  Smith  &  Co.,  59  S.  Water  St.,  on  account,  50  lbs.  Orange 
Pekoe  Ceylon  tea,  at  50^,  $25.00. 

Feb.  6.  Cash  sales  for  the  week  amounted  to  $243.26.  Make  the  entry  as  you  would 
make  it  for  a  single  cash  sale,  but  with  a  proper  explanation*. 

Feb.  6.  Paid  salaries  as  follows  in  cash:  Harry  J.  Myers,  bookkeeper,  $18.00; 
Geo.  N.  Weber,  salesman,  $12.00;  Willie  Smith,  delivery  boy,  $7.00t. 

Feb.  9.     The  South  Side  Bakery,  7920  Normal  Ave.,  bought  on  credit: 
.3  bottles  Snyder's  catsup,  at  22<t  $0.66 

2  lbs.  Young  Hyson  tea,  at  $1.00  2.00 

3  lbs.  finest  Santos  coffee,  at  17^  .51 
12  lbs.  Bakers'  No   1  Premium  cooking  chocolate,  at  38^         4.56 

12  cakes  Magic  yeast,  at  3(S  .36  $8.09 

Feb.  9.     Bought  from  Sprague,  Warner  &  Co.,  on  ten  days  credit: 
40  lbs.  Arabian  Mocha  coffee,  at  19^  $7 .  60 

20  lbs.  Young  Hyson  tea,  at  66(S  13.20 

24  bottles  India  curry  powder,  at  100  2.40  $23.20 

The  terms  of  purchase  must  be  given  in  the  explanation.  This  rule  must  be  observed  whenever 
goods  are  purchased  or  sold  on  definite  terms  as  to  when  or  how  settlement  shall  be  made. 

Feb.  9.     Charged  Mrs.  C.  S.  James  for  goods  delivered  to  her  today  as  follows : 

2  lbs.  best  Ceylon  tea,  at  $1.00  $2.00 

2  lbs.  Arabian  Mocha  coffee,  at  270  .54  $2.54 

Feb.  10.  Paid  cash  for  postage  and  stationery  as  follows.  Stamps,  $10.00;  2  M 
letter  heads,  $8.50;  2  M  No.  6  envelopes,  printed,  $2.50. 

Feb.  10.  Received  a  check  for  $7.00  from  the  South  Side  Bakery,  to  be  applied 
on  account. 

Use  the  explanation  "On  account."  When  cash  is  received  on  account  it  is  important  to  know 
whether  the  money  was  intended  to  cover  some  particular  bill  or  not.     In  this  case,  it  was  not. 

Feb.  11.  Received  cash  from  Mrs.  C.  S.  James  to  pay  for  the  goods  bought  by  her 
on  Feb.  1,  $1.45. 

Use  the  explanation  "Our  bill  of  Feb.  1." 

*In  a  business  having  a  large  number  of  small  cash  sales  (called  petty  cash  sales)  separate  entries  of 
each  of  such  sales  are  not  usually  made.  Instead  the  cash  is  rung  up  in  a  cash  register  as  received  and 
at  the  close  of  the  day  (not  usually  weekly  as  above)  the  total  is  entered  as  a  single  cash  sale  would  be. 
Sometimes  (especially  when  there  is  no  cash  register)  the  amounts  of  the  petty  sales  are  entered  in  a  petty 
cash  book,  the  total  of  which  is  periodically  entered  in  the  general  books. 

Mr.  Moore  sells  mostly  for  cash,  his  only  charge  accounts  being  with  a  few  boarding-house  keepers 
and  others  who  would  buy  in  quantity  the  kind  of  goods  he  has  for  sale. 

fThis  is  charged  to  Expense,  because  we  have  but  one  general  expense  account.  Many  business 
men,  wishing  to  know  the  exact  cost  of  delivery  service,  would  open  a  Delivery  Expense  account,  charging 
to  it  all  such  items  as  feed  for  horses  (or  gasoline  for  auto),  expenses  for  repairs,  horse  shoeing  and  voter- 
inary's  bills,  and  the  salary  of  the  delivery  boy.  This  account  would  be  subordinate  to  the  general  expense 
account,  closmg  into  it.  Several  subordinate  accounts  could  be  kept,  if  the  business  were  large  enough 
to  justify  it.  One  plan  would  be  to  keep  the  items  of  current  expense  in  an  account  called  "Delivery 
Expense,"  and  the  items  of  repairs  and  replacements  in  another  account   properly  headed. 


HOW    TO    FORWARD    AN    ACCOUNT 


77 


Feb.  12.     Bought  for  cash  one  roll-top  desk  and  one  swivel  chair,  $45.00. 

Feb.  13.  Finding  that  the  deliveries  can  be  taken  care  of  with  fewer  horses  and 
wagons,  we  sold  the  gray  mare  Nellie  and  one  old  delivery  wagon  (described  as  a  Stude- 
baker  1896  model.  Style  No.  23)  to  Robert  Burnett  for  cash,  $450.00. 

A  bill  of  sale  is  usually  given  when  property  of  this  kind,  to  the  value  of  a  certain  amount  (the 
amount  varies  in  different  states),  is  sold.  This  is  a  formal  document  stating  the  terms  of  sale  and 
describing  the  property  sold. 

Feb.  13.     Cash  sales  for  the  week,  $236.75. 

Feb.  13.  Paid  the  salaries  of  tlie  bookkeeper,  salesman,  and  delivery  boy  in  cash 
as  on  Feb.  6. 

At  this  point  you  are  to  post  and  take  a  trial  balance.  This  trial  balance  and  all 
you  will  take  hereafter  will  be  taken  by  differences,  not  by  footings.  After  posting  all 
transactions  up  to  this  point  proceed  as  follows:  Foot  each  side  of  each  ledger  account, 
writing  the  total  in  small  lead  pencil  figures  just  below  the  last  item  and  close  enough 
to  it  to  leave  room  for  what  must  be  written  later  on  the  next  line;  then  find  the  differ- 
ence between  the  two  totals  and  write  it  in  the  explanatory  column,  in  small  lead  pencil 
figures,  just  opposite  the  footing  of  the  column  which  shows  the  greater  total;  all  as  shown 
in  the  illustration  of  a  personal  account  on  page  33. 

When  all  the  ledger  accounts  have  been  footed  in  lead  pencil  in  this  manner,  prepare 
your  trial  balance,  listing  the  differences  only.  Thus,  opposite  the  name  of  Mrs.  C.  S. 
James  do  not  write  the  debit  and  credit  totals  of  the  account,  but  write  the  amount  $2.54, 
which  is  the  difference  between  the  two  totals,  in  the  debit  column,  since  it  represents 
the  excess  of  the  debit  side. 

The  balance  of  the  ledger  has  not  been  disturbed  by  the  foregoing  process,  for  it  will  be  observed 
that  in  the  case  of  each  ledger  account  listed  in  the  trial  balance  an  equal  amount  has  been  deducted  from 
each  side. 

Feb.  16.     Delivered  the  following  to  Mrs.  T.  J.  Foster,  charging  her  account: 


1  3-lb.  tin  Phillips'  Digestible  cocoa 

2  lbs.  paprika,  at  80^ 


12.00 
1.60 


$:3.60 


r       Feb.  16.     Collected  $251.25  in  cash  from  F.  A.  Bright,  for  his  note  due  today,  $250.00, 
and  interest  for  30  days  at  6%,  $1.25. 


How  to  Forward  an  Account 
When  the  money  column  on  either  side  of  a  page  becomes  filled  it  becomes  necessary 
to  forward  that  account  to  some  other  page.     You  will  use  the  following  forms  in  for- 
warding accounts: 

MERCHANDISE  (Page  77) 

191—  191— 


Jan. 

1 

Inventory 

/ 

4250 

65 

Jan. 

2 

18 

100 

48 

5 

23 

250 

8 

29 

56 

72 

6 

27 

56 

78 

12 
15 

32 
35 

45 
29 

50 

62 

Footing  For'd 

78 

17 

Footing  For'd 

38 
78 

10 

25 

4557 

43 

242 

57 

~ 

78 


191- 


MERCHANDISE 
191— 


Footing  Brot.  For'd      77        4557     43 


(Page  78) 


Footing  Brot.  For'd      77  242     57 


In  forwarding  a  personal  account,  close  the  account  with  a  balance,  forwarding  the 
balance  only.  When  forwarding  a  balance  in  this  way,  red  ink  is  used  for  the  balancing 
entry  and  black  ink  for  the  entry  on  the  page  to  which  the  account  was  forwarded.  In 
forwarding  footings,  no  red  ink  is  used,  ordinarily. 

Feb.  17.     Bought  from  Sprague,  Warner  &  Co.,  600  W.  Erie  St.,  on  account: 
20  lbs.  Penang  cloves,  at  36(S  $7 .  20 

12  cans  Royal  Dutch  mustard,  at  8^  .96 

24  bottles  Snyder's  catsup,  at  140  3.36  $11.52 

Feb.  17.  Gave  Jas.  P.  Smith  &  Co.  our  30-day  note  for  $.300.00,  dated  today  and 
bearing  interest  at  6%,  to  cover  our  account  with  them  up  to  and  including  their  bill 
of  Feb.  6. 

When  this  entry  is  posted  it  will  be  observed  that  Jas.  P.  Smith  &  Co.'s  account  exactly  balances. 
Rule  and  foot  the  account  at  once,  and  hereafter  follow  the  plan  of  ruling  and  footing  personal  accounts 
whenever  they  lialance.  Some  bookkeepers  simply  rule  a  single  line  across  the  account,  and  omit  the 
footings  and  double  ruling,  but  you  will  close  such  accounts  in  the  usual  way  until  differently  instructed. 

Feb.  18.  T.  J.  Foster  gave  us  his  30-day  note  dated  today,  and  bearing  6%  interest, 
for  $41.59,  the  balance  of  his  wife's  account  to  date.  Before  making  this  entry,  consult 
the  ledger  and  the  unposted  items  of  the  journal  to  see  that  the  amount  is  correct. 

WTien  this  entry  is  posted,  it  will  be  observed  that  Mrs.  T.  J.  Foster's  account  balances.  Rule  and 
foot  the  account  at  once,  as  you  did  in  the  case  of  Jas.  P.  Smith  &  Co.'s  account  after  posting  the  last  entry. 

When  a  note  is  received  to  cover  the  balance  of  a  customer's  account,  the  account  itself  is  closed  in 
the  ledger,  but  the  customer's  obligation  to  pay  is  the  same  as  ever.  The  note  is  a  written  acknowedg- 
ment  of  indebtedness  and  names  a  date  on  which  payment  will  be  made.  The  creditor  can  discount  the 
debtor's  note  if  he  wishes  to  realize  on  it  before  the  date  of  maturity.  For  these  reasons  the  note  is  pre- 
ferable to  the  account.  The  student  must  not  get  the  impression  that  giving  a  note  operates  in  the  slightest 
degree  to  relieve  the  debtor,  for  on  the  contrary  it  makes  his  obligation  even  more  definite. 

Feb.  19.     Paid  Sprague,  Warner  &  Co.,  in  cash,  tlie  amoiTnt  of  their  bill  of  Feb. 

18,  $23.20. 

Feb.  19.     The  South  Side  Bakery  had  the  following  goods  delivered  and  charged 

to  its  account: 

10  pkgs.  Arm  &  Hammer  brand  soda,  at  60  $0 .  60 
3  lbs.  cinnamon,  at  600  1 .  80 

3  tins  Van  Houten's  cocoa,  at  '^30  2. 19  .$4.59 

Feb.  20.  Bought  on  30  days'  credit  from  Jas.  P.  Smith  &  Co.,  24  tins  Van  Houten's 
cocoa,  at  56(t,  $13.44. 

Feb.  20.     Cash  sales  for  the  week,  $256.28. 

Feb.  20.     Paid  the  salaries  in  cash  as  on  Feb.  6. 

Feb.  23.  Sold  to  G.  E.  Harms  for  cash  100  2^  stamps.  (This  is  a  return  on  the 
expense  account.) 


TRANSACTIONS    FOR   FEBRUARY  79 

Feb.  23.     Sold  to  Mrs.  T.  J.  Foster,  on  account: 

2  bottles  grated  horseradish,  at  120  $0.24 
1  lb.  best  Ceylon  tea  1 .  00 

3  lbs.  golden  Rio  coffee,  at  13<i  .39              $1 .  63 

Feb.  24.  Sold  to  Mrs.  T.  J.  Foster  on  account  2  lljs.  Orange  Pekoe  Ceylon  tea,  at 
$1.00  a  pound. 

Feb.  25  Bought  50  bushels  of  oats,  for  horse  feed,  at  48?^,  paying  cash.  (Debit 
Expense). 

Feb.  25.  Received  $1.63  in  cash  from  Mrs.  T.  J.  Foster  to  cover  the  bill  against 
her  of  Feb.  23. 

Feb.  26.     Bought  from  Sprague,  Warner  &  Co.,  on  account: 

20  lbs.  cinnamon,  at  40(S  $8.00 

36  lbs.  Baker's  No.  1  Premium  cooking  chocolate,  at  26(f      9-36  $17.36 

Feb.  27.  Paid  Sprague,  Warner  &  Co.  .$11.52  in  cash  to  cover  the  bill  of  goods  bought 
from  them  ten  days  ago. 

Feb.  27.     Cash  sales  for  the  week,  $264.36. 

Feb.  27.     Paid  the  salaries  in  cash  as  on  Feb.  6. 

Inventories  Feb.  28:  Real  Estate,  $7500.00;  Furniture  &  Fixtures,  $867.50;  Horse 
&  Wagon,  $1170.00;  Mdse.,  $3879.23;  accrued  interest*  on  the  following  notes:  T.  J. 
Foster's  note  in  our  favor,  $41.59  from  Feb.  18  to  Feb.  27,  9  days  at  6%,  $.06;  our  note 
of  Jan.  19  in  favor  of  Dan  J.  Hartnett  &  Co.,  $263.50,  39  days  at  6%,  $1.71;  our  note 
of  Feb.  17  in  favor  of  Jas.  P.  Smith  &  Co.,  $300.00,  10  days  at  6%,  $.50.  The  last  two 
items  of  accrued  intei'est  are  liability  inventories,  so  called  because  they  are  inventories 
of  debt.  Their  effect  is  to  decrea.se  the  apparent  gain  of  the  interest  account.  You  will 
learn  more  about  liability  inventories  later.  For  the  present  treat  them  as  follows:  (1) 
List  them  among  the  lialiilities  in  the  financial  statement.  (2)  Add  them  to  the  debit 
total  of  the  account  affected,  when  preparing  the  loss  and  gain  statement.  (3)  In  closing 
the  interest  account  in  the  ledger,  enter  the  total  of  interest  liabilities  on  the  debit  side 
in  red  ink  as  an  inventory  before  closing,  and  bring  the  same  amount  down  below  the 
rulings  on  the  credit  side. 

Note  that  the  inventory  of  real  estate  is  unchanged.  The  real  estate  account  will 
not  affect  the  loss  and  gain  statement,  therefore,  and  nothing  will  be  done  to  it  in  clos- 
ing the  ledger. 

In  preparing  the  financial  statement,  list  the  assets  in  the  following  order:  Cash, 
Real  Estate,  Furn.  &  Fix.,  Horse  &  Wagon,  Mdse.,  Notes  Rec,  Interest,  Mrs.  C.  S.  James, 
Mrs.  T.  J.  Foster,  South  Side  Bakery.  This  arrangement  is  in  the  order  of  availability, 
those  assets  being  listed  first  which  can  the  most  quickly  be  made  available  as  cash.  The 
liabilities  should  be  listed  in  the  order  of  their  urgency,  those  liabilities  being  listed  first 
which  are  deemed  the  most  pressing.  List  the  liabilities  as  follows:  Notes  payable, 
Interest,  Jas.  P.  Smith  &  Co.,  Sprague,  Warner  &  Co.     In  preparing  the  loss  and  gain 

*Some  accountants  prefer  to  call  entries  of  interest  inventories  "adjustment"  entries,  since  they 
represent  items  not  now  due  us,  but  accrued  interest  which  will  be  paid  at  a  later  date;  and  the  purpose 
of  such  entries  is  simply  to  adjust  the  interest  account  so  that  it  will  accurately  show  the  losses  and  gains 
for  the  period.  Since  these  items  are  in  effect  the  same  as  inventories,  and  are  treated  in  the  books  just 
as  inventories  are  treated,  it  is  better  for  your  present  purposes  to  place  them  in  the  same  class  with  prop- 
erty inventories.     Throughout  this  text  we  shall  refer  to  them  as  inventories. 


80  SET   TWO 

statement,  show  the  inventory  of  Mdse.  Feb.  1  and  the  purchases  for  February  as  sepa- 
rate items,  their  sum  being  the  total  cost  of  Mdse. 

The  arrangement  of  accounts  in  the  ledger  is  as  follows*:  Proprietor's  account  (the 
capital  account);  accounts  showing  loss  or  gain;  the  loss  and  gain  account;  asset  accounts; 
liability  accounts. 

After  taking  a  balance  of  the  March  1  balances,  check  its  items  with  the  results  shown 
by  your  financial  statement. 

PROBLEMS 

1.  On  Jan.  1,  191—,  Mr.  A.  invested  $10,000.00  in  business.  On  Jan.  5  he  withdrew  $50.00.  His 
gain  for  January  was  $217.65.     What  was  the  balance  of  the  capital  account  on  Jan.  317 

2.  Mr.  B.  began  business  on  Feb.  1,  191 — ■,  with  an  investment  of  $5000.00.  On  Feb.  15  he  increased 
his  investment  $2500.00.     His  gain  for  the  month  being  $276.82,  what  was  the  business  worth  on  Feb.  28? 

3.  Mr.  C  invested  $7500.00  on  Mar.  1,  191—.  On  the  10th  of  the  month  he  added  $2100.00  to  his 
capital.  On  Mar.  20  he  withdrew  $125.00  for  personal  use.  The  net  loss  of  the  business  during  March 
was  $325.60.     What  was  the  balance  of  the  capital  account  on  Mar.  31? 

4.  On  April  1  Mr.  D.  began  business  with  $6500.00  cash.  He  withdrew  $75.00  on  .\pril  5.  He 
added  $1000.00  to  his  investment  on  April  20.  On  .\pril  22  he  withdrew  $65.70  for  personal  use.  On 
April  30  his  financial  statement  showed  that  the  business  was  worth  $7500.00.  Was  there  a  loss  or  a  gain 
during  April,  and  if  so  how  much? 

5.  On  May  31,  Mr.  E's  loss  and  gain  statement  showed  a  profit  of  $364.50  for  the  month.  His  finan- 
cial statement  showed  that  the  business  was  worth  $8346.75  on  May  31.  During  the  month  of  May  his 
personal  withdrawals  amounted  to  $137.28,  and  the  ledger  shows  that  on  May  15  he  had  put  an  additional 
$1000.00  into  the  business.     What  was  the  balance  of  the  proprietor's  account  on  May  1? 

Lesson  XXVI 

Continue  the  transactions  of  March,  proceeding  as  follows: 

(1)  Journalize  the  transactions  of  Mar.  1  to  Mar.  13  inclusive.  (2)  Post  the 
foregoing.  (3)  Take  a  trial  balance  as  of  Mar.  13.  (4)  Journalize  the  transactions  of 
Mar.  15  to  Mar.  31  inclusive.  (5)  Post  the  foregoing.  (6)  Take  a  trial  balance  as  of 
Mar.  31.     (7)  Prepare  statements.     (8)  Close  the  ledger.     (9)  Take  a  balance  of  balances. 

Unless  your  teacher  shall  instruct  otherwise,  have  your  work  approved  at  each  step 
before  proceeding  with  the  next  step. 

TRANSACTIONS 

191—. 

March  1.     A.  B.  Moore  withdrew  $1000.00  cash  for  his  personal  use. 

Mar.  1.     Bought  from  Sprague,  Warner  &  Co.,  for  cash: 

20  lbs.  Penang  cloves,  at  36^S  $  7 .  20 

30  lbs.  cinnamon,  at  40«i  12.00 

30  lbs.  Orange  Pekoe  Ceylon  tea,  at  57^  17.10 

25  lbs.  best  Ceylon  tea,  at  68^  17.00            $53.30 


We  have  an  open  account  with  Sprague,  Warner  &  Co.  and  it  is  better  to  run  this  transaction  through 
the  ledger,  even  though  it  is  for  cash,  so  that  the  ledger  will  show  all  our  transactions  with  them.  You 
will  therefore  make  two  entries  in  your  journal,  one  crediting  Sprague,  Warner  &  Co.  for  the  amount  of 
the  purchase,  the  other  debiting  them  for  the  payment.  Since  these  entries  will  both  be  posted,  Sprague, 
Warner  &  Co.'s  account  will  show  the  complete  transaction. 

*  Some  accountants  prefer  to  Ust  the  proprietor's  account  last,  because  it  is  in  a  bookkeeping  sense 
a  liability,  and  is  the  least  urgent  of  the  liabilities.  Again,  some  accountants  prefer  to  put  the  assets  first 
in  the  ledger  and  the  liabilities  last,  the  loss  or  gain  accounts  coming  between.  In  any  case,  it  is  customary 
to  divide  the  ledger  into  sections,  one  section  for  each  group,  with  plenty  of  blank  pages  in  each  section 
for  new  accounts. 


TRANSACTIONS  FOR  FEBRUARY  81 

Mar.  1.     Sold  to  Mrs.  C.  S.  James,  on  account: 

3  lbs.  Young  Hyson  tea,  at  S1.05  $.3.15 

5  lbs.  golden  Rio  coffee,  at  25^  1 .  25 
1  3-lb.  tin  Phillips'  Digestible  cocoa                                    2 .  00 

1  lb.  paprika  .SO  S7.20 

Mr.  Moore  opened  an  account  with  the  First  National  Bank  today  and  made  a  deposit 
of  $1000.00  of  the  cash  on  hand.  This  will  not  affect  your  bookkeeping.  It  simply  means 
that  from  now  on  the  cash  will  be  kept  in  two  places — part  of  it  will  be  in  the  cash  drawer 
and  part  of  it  will  be  in  the  bank.  When  checks  are  drawn  against  the  money  in  the 
bank,  this  diminishes  the  cash  on  hand  and  you  will  make  the  entry  for  cash  paid  out, 
just  as  you  would  have  made  it  had  the  cash  been  paid  out  from  the  cash  drawer. 

Mar.  2.     Sold  to  Mrs.  T.  J.  Foster,  on  account: 

2  lbs.  best  Ceylon  tea,  at  $1,00  $2.00 

6  lbs.  Arabian  Mocha  coffee,  at  27^  1 .62 

4  tins  Baker's  breakfast  cocoa,  at  25^  1.00 

1  lb.  cinnamon  .60  S5.22 

Desiring  to  determine  whether  it  is  economical  for  him  to  attend  to  his  own  deliveries, 
Mr.  Moore  asks  you  to  prepare  for  him  a  statement  showing  all  facts  bearing  upon  the 
question.  You  find  that  the  delivery  boy  makes  on  an  average  30  deliveries  a  day;  that 
feed  for  the  horses  costs  800  a  day;  that  $10.00  a  month  is  paid  for  stable  rent;  that  the 
salary  of  the  delivery  boy  is  $7.00  a  week;  that  the  City  Delivery  Co.,  will  contract  to 
deliver  all  packages  for  7j0  each.  Mr.  Moore  has  an  offer  of  $11.50.00  for  his  horses  and 
wagons.  Prepare  a  statement  that  will  show  him  whether  he  should  continue  to  make 
his  own  deliveries  or  not,  assummg  that  the  interest  on  money  tied  up  in  horses  and  wagons 
is  worth  6%,  and  that  the  extra  expense  of  maintaining  horses  and  wagons  is  costing  on 
an  average  at  least  $10.00  a  month. 

Mar.  3.  After  considering  the  statement  you  prepared  for  him  yesterday,  Mr.  Moore 
has  decided  to  sell  his  horses  and  wagons,  and  to  dispense  with  the  services  of  the  delivery 
boy  after  this  week.  He  receives  H.  K.  Wagner's  15-day  note  for  $1150.00  at  6%  for 
the  horses  and  wagons. 

Mar.  4.  Received  $2.54  from  Mrs.  C.  S.  .James  in  settlement  of  the  balance  due  us 
on  Mar.  1. 

Mar.  5.     Charged  Mrs.  T.  J.  Foster,  for  Mdse.  sold  to  her  today, 
4  bottles  India  curry  powder,  C.  &  B.,  at  15^  $0.60 

1  lb.  Penang  cloves  .55 

3  bottles  Snyder's  catsup,  at  22^  .66 

3  tins  Van  Houten's  cocoa,  at  73^  2. 19  $4.00 

Mar.  6.     Cash  sales  for  the  week,  $227.50. 

Mar.  6.  Paid  salaries  as  follows  in  cash:  Harry  J.  Myers,  bookkeeper,  $20.00;  Geo. 
N.  Weber,  salesman,  $12.50;  Willie  Smith,  delivery  boy,  $7.00;  total,  $39.50.  Dismissed 
Willie  Smith  with  a  letter  of  recommendation,  to  which  he  was  entitled,  as  he  had 
always  been  a  faithful  and  diligent  worker,  and  only  left  because  we  had  no  further 
need  of  a  delivery  boy*. 

*The  practice  of  giving  letters  of  recommendation  to  employees  who  have  been  discharged  for  incom- 
petency, laziness,  or  unfaithfulness  cannot  be  too  strongly  condemned.  The  employer  who  does  this 
imposes  on  some  other  business  man  who  hires  the  incompetent  one  on  his  recommendation;  he  does  the 
worst  thing  in  the  world  for  the  employee,  who  should  understand  that  if  he  wants  a  recommendation, 
he  should  be  worthy  of  it;  and  he  proves  himself  unworthy  of  belief. 


82  SET   TWO 

Mar.  8.     Sold  to  the  South  Side  Bakery  on  account, 

12  cakes  Magic  yeast,  at  3(5  $0.36 

4  bottles  vanilla,  at  IS^  .72 

12  lbs.  Baker's  No.  1  Premium  cooking  chocolate,  at  38^  4.56               $5.64 

Mar.  8.     Sold  on  account  to  Mrs.  C.  S.  James, 

3  bottles  India  curry  powder,  C.  &  B.,  at  15^  $0.45 

2  cans  Royal  Dutch  mustard,  at  12{i  .24 

3  pkgs.  Arm  &  Hammer  soda,  at  6^  .18 
3  bottles  vanilla,  at  1S(S                                                                  .54  $1.41 

Mar.  8.  Paid  Sprague,  Warner  &  Co.,  by  check,  the  amount  due  them  for  Mdse. 
sold  us  on  Feb.  26.  This  is  a  cash  payment,  as  formerly  explained.  It  settles  our  account 
with  them  in  full. 

Mar.  8.     Sold  to  Mrs.  T.  J.  Foster,  on  account, 

3  lbs.  Young  Hyson  tea,  at  $1.05 

4  lbs.  Arabian  Mocha  coffee,  at  27(S 

5  3-lb.  tins  Phillips'  Digestible  cocoa,  at  $2.00 

6  cakes  Magic  yeast,  at  3^ 
4  pkgs.  Arm  &  Hammer  soda,  at  6^  .  24  $14 .  65  j 

Mar.  10.     Sold  on  account  to  Mrs.  Geo.  E.  Weeks,  5429  Drexel  BouL,                                J 

1  3-lb.  tin  Phillips'  Digestible  cocoa                                        $2.00  ; 

3  lbs.  golden  Rio  coffee,  at  13^                                                  .39  I 

1  lb.  cinnamon                                                                                   .  60  $2 .99  | 

Mar.  11.     T.  J.  Foster  gave  us  his  30-day  note,  bearing  6%  interest,  for  the  balance          ' 

due  u.s  on  our  account  against  his  wife,  $25.87.  ' 

After  posting,  rule  up  the  account.  : 
Mar.  12.     Bought  from  Jas.  P.  Smith  &  Co.  on  10  days  credit, 

12  doz.  bottles  India  curry  powder,  at  $1.10  $13.20  \ 

6  doz.  cans  Royal  Dutch  mustard,  at  90^  5.40  ' 

60  1-lb.  pkgs.  Arm  &  Hammer  soda,  at  i^  2.40  $21.00  ] 

Mar.  12.     Sold  to  the  South  Side  Bakery  on  account,  3  lbs.  paprika,  at  80?*,  $2.40.  ! 

Mar.  13.     Bought  from  Reid,  Murdock  &  Co.,  on  our  30-day  note  at  6%,  i 

60  lbs.  Young  Hyson  tea,  at  66(S  $39.60  ', 

64  lbs.  best  Ceylon  tea,  at  68fi  43 .  52 

120  lbs.  finest  Santos  coffee,  at  17(i  20.40  $103.52  ; 

Mar.  13.     Cash  sales  for  the  week,  $232.65. 

Mar.  13.     Paid  the  salaries  of  the  bookkeeper  and  the  salesman  in  cash  as  on  Mar.  6.  i 

Deposited  $500.00  (no  bookkeeping  entry).  i 

As  previously  noted,  the  deposit  does  not  affect  your   bookkeeping,  and  no   entry  of  it  is  made  | 

in  your  ledger.     Records  of  deposits  and  checks  are  kept  on  the  stubs  of  the  check  book,  from  which  the  I 

balance  in  the  bank  may  be  determined  at  any  time,  and  this  added  to  the  cash  in  the  drawer  will  give 
the  balance  of  cash  on  hand,  which  should  agree  with  the  balance  of  the  cash  account.  ' 

A  bank  account  is  sometimes  kept  in  the  ledger,  and  when  so  kept  cash  in  bank  is  not  considered  I 

the  same  as  cash  on  hand.     This  plan  is  not  often  used,  however.         '  ' 


TRANSACTIONS    FOR    MARCH  83 

Note, — Compare  funds  in  the  bank  and  in  the  cash  drawer  to  money  in  the  right-hand  pocket  and 
money  in  the  left-hand  pocket.  Whenever  money  is  received,  whichever  pocket  it  goes  into,  the  cash 
on  hand  is  increased.  Whenever  money  is  paid  out,  whichever  pocket  it  is  paid  out  from,  the  cash  on 
hand  is  decreased.  AMien  money  is  transferred  from  one  pocket  to  the  other,  the  cash  on  hand  is  neither 
increased  nor  decreased.     The  sum  of  the  amounts  in  the  two  pockets  at  any  time  is  the  cash  on  hand. 

Mar.  15.     Received  $5.00  cash  from  the  South  Side  Bakery  on  account. 
Mar.  16.     Sold  on  account  to  Mrs.  Geo.  E.  Weeks, 

2  lbs.  cinnamon,  at  60^  $1.20 

3  bottles  Snyder's  catsup,  at  22<!  .66  $1.86 

Mar.  17.     Sold  to  ]\Irs.  C.  S.  James,  on  account, 

3  lbs.  finest  Santos  coffee,  at  25^  $0.75 

1  lb.  Van  Houten's  cocoa  .73 

3  bottles  Snyder's  cat^p,  at  220  .66  $2 .  14 

Mar.  18.  H.  K.  Wagner's  note  for  $1150.00  falls  due  today  with  6%  interest.  Mr. 
Wagner  is  unable  to  take  up  the  entire  note  at  this  time,  but  he  pays  the  interest  and 
$650.00  of  the  principal  by  check,  also  giving  his  new  note  for  $500.00  for  60  days  at  6%. 
We  deposited  the  check. 

Mar.  19.  Bought  on  account  from  Jas.  P.  Smith  &  Co.,  72  lbs.  Van  Houten's  cocoa, 
1  lb.  tins,  at  56^,  $40.32. 

Mar.  19.  Paid  by  check  our  30-day  note  in  favor  Jas.  P.  Smith  &  Co.,  due  today, 
$300.00,  with  interest  at  6%,  $1.50.     Amount  of  check,  $301.50. 

Mar.  20.  T.  J.  Foster  paid  his  note  of  Feb.  18,  $41.59,  and  interest  for  30  days  at 
6%,  $.21,  in  cash.     Amount  of  cash  received,  $41.80. 

Mar.  20.  Received  a  check  for  $7.20  from  Mrs.  C.  S.  James  in  settlement  of  our 
bill  against  her  of  Mar.  1. 

Mar.  20.  Paid  our  note  of  Jan.  19  in  favor  of  Dan  J.  Hartnett  &  Co.,  $263.50,  and 
interest  for  60  days  at  6%,  $2.64,  by  check.     Amount  of  check,  $266.14. 

Mar.  20.     Cash  sales  for  the  week,  $241.63. 

Mar.  20.     Paid  the  salaries  for  the  week  as  on  Mar.  13. 

Mar.  20.  Mr.  Moore  deposited  in  the  bank  $600.00  in  cash  and  the  check  for  $7.20 
received  today. 

Mar.  22.     Gave  Jas.  P.  Smith  &  Co.  our  check  for  $34.44,  to  cover  two  bills  due  today. 

Mar.  23.  Sold  to  Mrs.  Geo.  E.  Weeks  on  account  3  lbs.  Young  Hyson  tea,  at  $1.05, 
$3.15. 

Mar.  24.     Purchased  from  Sprague,  Warner  &  Co.  on  10  days  time, 

24  lbs.  Penang  cloves,  at  36<!  $8.64 

20  lbs.  cinnamon,  at  400  "  8.00  $16.64 

Mar.  24.     Sold  to  the  South  Side  Bakery  on  account,  12  cakes  Magic  yeast,  at  3(S,  $.36. 

Mar.  25.  Mrs.  C.  S.  James  paid  her  account  in  full  in  cash.  To  determine  the 
amount  due  from  her  at  this  time  refer  to  the  ledger;  then  carefully  inspect  the  unposted 
items  in  the  journal. 

After  posting,  rule  up  the  account.  ' 

Mar.  26.  Sold  to  Mrs.  Geo.  E.  Weeks  on  account  5  lbs.  Arabian  Mocha  coffee,  at 
27^,  $1.35. 


84  SET   TWO 


Mar.  27.     Cash  sales  for  the  week, 

Mar.  27.     Paid  the  salaries  as  on  Mar.  13. 

Mar.  29.  At  Mr.  Moore's  request  you  paid  by  check  Jay  E.  Emerson,  agent  for  the 
Mutual  Benefit  Life  Insurance  Co.,  $60.78,  the  amount  of  the  premium  due  today  on 
Mr.  Moore's  life  policy  No.  213469. 

Mar.  31.  Paid  the  City  Delivery  Co.  in  cash  for  542  deliveries  at  7^i  each,  $40.65. 
Most  of  these  deliveries  were  of  goods  sold  for  cash. 

Mar.  31.     Cash  sales  to  date,  $132.56. 

If  you  have  trouble  with  your  trial  balance  go  over  your  worlc  very  carefully  as  suggested  on  page 
52.  If  the  error  still  remains  undiscovered,  it  may  be  that  your  balances  were  not  brought  down  correctly 
on  Mar.  1.  Check  over  your  balances  of  Mar.  1  to  see  whether  your  error  lies  here.  Unless  your  ledger 
was  in  balance  at  the  first  of  the  month,  you  cannot  expect  it  to  be  in  balance  at  the  end. 

Inventories,  Mar.  31:  Real  Estate,  $7480.00;  Furniture  &  Fixtures,  $860.00;  Horse 
and  Wagon,  no  inventory — close  account  to  Loss  &  Gain;  Mdse.,  $3482.45;  Expense, 
one-half  of  the  weekly  salaries  of  the  bookkeeper  and  salesman,  earned  by  them  but  unpaid, 
$16.25 — a  Hability  inventory,*  interest  receivable  accrued  on  T.  J.  Foster's  note  for  $25.87, 
dated  Mar.  11  and  bearing  interest  at  6%,  $.09;  interest  receivable  accrued  on  H.  K. 
Wagner's  note  for  $500.00,  dated  Mar.  18  and  bearing  interest  at  6%,  $1.08;  interest  pay- 
able accrued  on  our  note  for  $103.52  in  favor  of  Reid,  Murdock  &  Co.  dated  Mar.  13,  at 
6%,  $.31. 

Note  that  there  are  both  resource  and  liability  inventories  of  interest.  Follow  the 
instructions  given  at  the  end  of  the  transactions  for  February,  in  handling  these  items 
in  the  statements  and  in  closing  the  ledger. 

The  item  of  salaries  earned  and  unpaid  is  a  liability  inventory  to  expense,  or  more 
exactly  speaking,  an  adjustment  entry  the  purpose  of  which  is  to  make  the  expense  account 
e.xhibit  the  exact  cost  of  expenses  for  the  month.  When  the  red  ink  entry  of  $16.25  is 
added  to  the  debit  side  of  the  account,  the  total  is  the  real  total  of  expenses  for  the  month. 
The  $16.25  is  brought  down  onto  the  credit  side  of  the  expense  account  below  the  rulings 
and  this  acts  as  an  offset  to  the  $32.50  that  will  be  entered  on  the  debit  side  on  Apr.  3. 
The  effect  of  this  adjustment  entry  is  to  throw  $16.25  of  the  amount  paid  out  for  salaries 
for  the  week  ending  Apr.  3  into  the  month  of  March,  where  it  belongs,  while  the  rest  of 
it  ($16.25,  represented  by  $32.50  on  the  debit  side  offset  by  $16.25  on  the  credit  side) 
appears  as  a  charge  against  the  month  of  April. 

The  "proof"  which  you  prepare  to  show  the  agreement  of  the  two  statements  should 
analyze  the  capital  account,  appearing  in  the  following  form: 

PROOF 

Investment  March  1,  191— ^=i=****_** 

Withdrawals         March     1 $1000 .  00 

March  29 **  _  **  ****  ** 

Net  investment I*****  _  ** 

Net  gain  for  March ***** 

Net  capital  March  31,  191— I*****  ** 

*This  should  be  listed  first  among  the  liabiUties,  as  obligations  of  this  kind  take  precedence  ove' 
ordinary  liabilities  for  goods  purchased. 


INTEREST    AND    DISCOUNT  85 

Prepare  a  record  of  transactions  with  the  bank  that  will  show  what  the  balance 
in  the  bank  should  be  at  this  time.  From  this  and  your  cash  account  you  can  determine 
how  mufli  cash  should  be  in  the  cash  drawer. 

Lesson  XXVII 
JOURNALIZING 

Interest  and  Discount 

Interest  is  the  use  of  money  for  which  consideration  is  paid.  When  one  has  the  use 
of  money  belonging  to  another  he  must  pay  for  that  use.  For  convenience  the  money 
paid  for  interest  is  called  interest  money,  or  interest.*  Discount  is  an  allowance  made 
for  the  prepayment  of  a  debt  not  yet  due.  Thus,  if  A  owes  B  $1000.00  due  on  April  1, 
he  should  pay  for  interest  if  he  allows  the  debt  to  run  to  May  1,  but  is  entitled  to  discount 
if  he  pays  it  on  March  1.  There  is  no  difference,  as  far  as  the  bookkeeping  is  concerned, 
between  the  two,  but  it  should  be  noted  that  interest  paid  in  advance,  or  discount,  is 
more  expensive  to  the  person  making  the  allowance,  because  it  is  paid  at  an  earlier  date. 
If  A  borrows  $1000.00  from  the  bank  for  60  days,  allowing  the  bank  to  deduct  $10.00 
at  the  time  of  the  loan,  he  is  not  making  as  good  a  bargain  as  if  he  had  borrowed  $1000.00 
from  some  one  who  would  permit  him  to  keep  the  entire  $1000.00  for  60  days  and  then 
return  it  with  $10.00  for  interest,  because  in  the  latter  case  A  would  have  had  the  use 
of  the  $10.00  for  60  days. 

Do  not  forget,  however,  that  there  is  no  difference,  as  far  as  the  bookkeeping  entry 
is  concerned,  between  interest  and  discount.  When  interest  (or  discount)  costs  the  busi- 
ness, debit  the  interest  account.  When  interest  (or  discount)  produces  returns  or  effects 
a  saving  for  the  business,  credit  the  interest  account.  Interest  and  discount  items  are 
properly  kept  in  the  same  account  in  the  ledger,  which  may  be  called  Interest  or  Interest 
&  Discount. 

An  important  source  of  revenue  for  banks  is  tlie  loaning  of  money.  The  bank  usually  takes  the 
note  of  the  borrower,  which  must  ordinarily  be  secured.  The  note  is  made  out  for  the  face  of  the  loan 
and  the  borrower  receives  this  amount  less  a  discount.  Again,  a  borrower  instead  of  giving  his  own  note 
may  endorse  to  the  bank  a  note  which  he  holds  signed  by  some  other  person,  whereupon  the  bank  will 
deliver  to  him  or  credit  to  his  account  the  amount  which  the  note  calls  for,  less  a  discount.  If  the  note 
is  interest-bearing,  the  full  amount  of  the  note  (face  plus  interest  for  the  full  time  of  the  note)  should  be 
discounted.     The  interest  may  be  computed  at  one  rate  and  the  discount  at  another. 

Whether  interest  is  due  or  not  is  a  matter  of  agreement  and  of  law;  that  is,  interest  accrues  whenever 
there  is  an  agreement,  or  a  custom,  or  a  law  that  demands  it.  Sometimes  interest  is  due  on  accounts 
that  are  not  paid  on  a  certain  date.  When  the  rate  of  interest  is  not  agreed  upon,  the  legal  rate  will  apply. 
This  rate  varies  in  different  states.  Interest  at  higher  than  a  certain  rate  (which  rate  varies  in  different 
states)  is  called  usury  and  a  penalty  for  usury  is  usually  provided  by  the  law  which  defines  it. 

Do  not  confuse  interest  and  discount  with  cash  discount,  which  is  an  allowance  for  the  prepayment 
of  trading  bills  and  is  usually  an  arbitrary  percentage  deducted  from  the  amount  of  the  bill  for  payment 
before  a  given  date.     Cash  discount  is  allowed  not  only  that  the  seller  may  have  the  use  of  the  money, 

*This  is  not  a  correct  use  of  the  word  interest,  in  a  bookkeeping  sense,  for  interest  is  the  use  of  money, 
not  the  money  paid  for  the  use  of  money.  Interest  is  a  privilege  for  which  money  is  paid.  Thus,  money 
is  paid /or  interest,  or  money  is  reserved/or  interest,  just  as  money  is  paid /or  rent,  money  is  paid /or  insur- 
ance. We  commonly  say  that  we  pay  rent,  pay  insurance,  or  pay  interest,  liut  none  of  these  expressions 
is  correct.     We  pay  cash  (or  something  else  of  value)  for  rent,  for  insurance,  or  for  interest. 


86  JOURNALIZING 

but  in  order  to  reduce  his  risk  in  carrying  accounts,  and  is  comparatively  liljeral.  Ordinary  interest  and 
discount  is  a  small  allowance  baseU  on  use  of  money  only,  and  time  is  an  essential  in  computing  it,  whereas 
cash  discount  is  not  based  upon  exact  time  of  "use. 

Journalize  the  following  transactions.  For  convenience,  you  may  omit  the  explana- 
tions in  making  these  entries: 

191—. 

Jan.  1.     Paid  cash  for  my  6-month  note  in  favor  of  Graham  &  Welsh  for  $500.00  due  today  with 

interest  at  G%. 

Jan.  2.  Henry  E.  Adkins  paid  cash  for  his  note  for  $450.00  in  our  favor  due  today  with  interest 
for  90  days  at  G7c- 

Jan.  3.  Received  from  the  City  Railways  Co.  semi-annual  interest  on  $1000.00  worth  of  3%  coupon 
bonds,  in  cash. 

Jan.  4.     Paid  the  quarterly  interest  on  a  $5000.00  mortage  on  our  building,  at  5%,  in  cash. 

Jan.  5.  Borrowed  $8000.00  from  the  First  National  Bank  for  60  days.  We  gave  them  our  note 
for  the  amount,  and  they  discounted  the  note  at  6%. 

Jan.  6.  Jas.  E.  Hawley  discounted  his  60-day  note  in  our  favor  for  $400.00.  The  note  was  dated 
Dec.  7.     It  bore  interest  at  6%  and  was  discounted  at  5%. 

First  compute  the  interest  for  60  days  at  6%  and  add  it  to  the  face  of  the  note.  The  amount  so 
resulting  is  now  to  be  discounted  for  30  days  at  5%.  The  result  is  the  cash  received.  The  difference 
between  the  cash  received  and  the  face  of  the  note  is  to  be  credited  to  the  interest  and  discount  account. 

Some  accountants  prefer  to  make  two  entries  for  interest  in  such  a  case,  one  crediting  the  interest 
and  discount  account  for  the  full  amount  of  the  interest,  and  the  other  debiting  the  interest  and  discount 
account  for  the  amount  of  the  discount. 

Note. — The  verb  "to  discount"  may  be  used  in  either  two  ways.  It  may  mean  "to  sell  at  a  dis- 
count" or  it  may  mean  "to  buy  at  a  discount."  Thus  we  may  say  we  discounted  our  note  at  the  bank, 
or  we  may  say  the  bank  discounted  our  note,  both  expressions  referring  to  the  same  transaction.  This 
is  a  peculiarity  of  the  language. 

Jan.  16.  We  discounted  at  the  bank  H.  N.  Cannon's  note  in  our  favor.  The  note  was  for  $600.00, 
dated  Jan.  1,  bearing  interest  at  7%,  and  maturing  90  days  from  its  date.     Rate  of  discount,  4%. 

Jan.  20.  Paid  C.  L.  Masters  &  Co.'s  invoice  of  Dec.  6,  $180.00.  The  invoice  was  sold  to  us  on 
30  days'  time,  'with  interest  at  6%  payable  after  maturity. 

Jan.  21.  The  Standard  Mfg.  Co.  sent  us  its  check  in  satisfaction  of  a  judgment  against  it  in  our 
favor.  We  had  brought  suit  for  $500.00  due  us  April  1  of  last  year  on  account.  The  court  had  allowed 
our  claim  and  interest  at  6%  from  April  1.  Count  time  by  exact  days  and  figure  interest  on  the  basis 
of  365  days  to  the  year*. 

Jan.  23.  Received  cash  from  Howe  &  Watson  for  their  note  in  our  favor.  The  note  was  for  $625.00. 
It  was  dated  November  24  and  bore  6%  interest. 

Jan.  25.  Received  Geo.  W.  Booker's  check  for  $250.00  to  apply  on  his  note  in  our  favor.  The 
note  was  for  $680.00  at  5%  and  was  dated  Jan.  25  of  last  year,  interest  being  payable  annually.  The 
payment  was  applied  first  to  the  interest  due  and  then  to  the  principal.  The  old  note  was  taken  up  by 
Mr.  Booker  and  a  new  note  issued  by  him  for  the  balance  due. 


*One  of  the  most  perplexing  questions  to  the  student  is  whether  to  count  time  by  exact  days  or 
by  compound  subtraction  and  whether  to  compute  interest  on  the  basis  of  360  or  365  days  to  the  year. 
It  is  impossible  to  lay  down  a  rule  for  this,  because  local  customs  govern  and  these  customs  differ  in  different 
localities.  In  general,  the  custom  is  to  count  by  exact  days  on  short  loans  (up  to  90  days,  or  even  longer 
periods  of  time  when  the  time  is  expressed  in  days)  and  by  months  when  the  time  is  expressed  in  months. 
Custom  requires  that  interest  be  computed  on  a  basis  of  360  days  to  the  year  ordinarily  (12  months  of 
30  days  each)  as  this  makes  computation  easier  The  policy  of  the  law  is  usually  that  of  exact  justice 
to  the  cent,  and  for  that  reason  interest  on  judgments  and  on  obligations  adjudicated  in  the  courts  is 
usually  computed  on  a  basis  of  365  days  to  the  year,  time  being  counted  exactly. 


JOURNALIZING  "  87 

General  Review  of  Journaling 

Journalize  the  following  transactions.  For  convenience,  you  may  omit  the  explana- 
tions in  making  these  entries: 

EXERCISE  1 

191—. 

Feb.  1.  M.  R.  Greenleaf  invested  in  business  .$2,500.00  in  cash. 

Feb.  1.  Paid  cash  for  February  rent,  $75.00. 

Feb.  2.  Bought  from  J.  N.  Kimball  on  account  Mdse.  invoicing  at  $560.00. 

Feb.  3.  Sold  Mdse.  for  cash,  |;56.50. 

Feb.  5.  Issued  our  note  for  $1.50.00,  due  in  10  days  at  0%,  in  favor  of  J.  N.  Kimball,  to  be  applied 
on  account. 

Feb.  6.  Sold  to  H.  K.  Watts  on  account,  goods  billed  at  $73.50. 

Feb.  8.  Bought  furniture  and  fi.xtures,  including  glass  show-case  for  store,  $750.00.  Paid  $250.03 
in  cash,  and  gave  a  15-day  note  at  5%  for  the  balance. 

Feb.     9.     Paid  J.  N.  Kimball  $125.00  in  cash,  on  account. 

Feb.  10.     H.  K.  Watts  paid  $45.00  on  account,  in  cash. 

Feb.  11.     M.    R.  Greenleaf  took  $25.00  in  cash  to  pay  a  personal  bill. 

Feb.  12.     Sold  L.  A.  Rochelle  Mdse.  on  his  15-day  note  at  67o,  $165.50. 

Feb.  12.     Paid  in  cash  for  750  2^  stamps. 

Feb.  15.     Redeemed  our  note  of  Feb.  5  with  accrued  interest,  in  cash. 

Feb.  16.  Sold  three  glass  showcases,  second-hand,  to  T.  J.  Murray  for  $110.00.  He  paid  $10.00 
in  cash,  and  gave  his  10-day  note  for  the  balance. 

Feb.  17.  H.  K.  Watts  returned  Mdse.  which  we  had  sold  to  him  for  $5.00,  and  we  gave  him 
credit. 

Feb.  IS.     Accommodated  a  friend  with  100  2^*  stamps  for  vvhioh  he  paid  in  cash. 

Feb.  19.     M.  R.  Greenleaf  invested  $2000.00  more  in  the  busines.s,  in  cash. 

Feb.  20.     Sold  to  B.  M.  Miller  on  account  goods  invoiced  at  $135.00. 

Feb.  23.  Our  note  dated  Feb.  8  fell  due  this  day.  Redeemed  it  by  giving  a  new  note  to  cover  the 
amount  of  the  old  note  and  interest. 

Feb.  27.     L.  A.  Rochelle  paid  in  cash  the  amount  due  on  his  note  Feb.  12  and  accrued  interest. 

EXERCISE  2 

191—. 

March  1.  C.  D.  Ross  invested  in  business  as  follows:  Cash,  $1750.00;  stock  of  goods,  $1560.50; 
H.  E.  Randall's  note  in  his  favor,  dated  Jan.  20,  for  60  days  at  6%,  $780.50. 

Mar.  2.  Bought  from  G  F.  Harms  Mdse.  invoicing  at  $472.00.  Issued  two  notes  to  cover  the 
amount  due,  as  follows:    Our  10-day  note  at  6%,  $250.00;  our  30-day  note  at  6%,  $222.00. 

Enter  the  notes  payable  as  two  separate  items.     Why? 

Mar.  3.     Sold  to  W.  A.  Hatfield  on  account  Mdse.  invoicing  at  $387.50. 

Mar.  4.  Discounted  to  Harris  &  Co.  on  account,  J.  E.  Randall's  60-day  note  dated  Jan.  20,  for 
$780.50.     The  note  bore  6%  interest,  and  was  discounted  at  5%. 

Mar.  5.  Redeemed  our  30-day  note  dated  March  2  by  paying  Mr.  Harms  in  cash  the  face  of  the 
note  and  interest  to  date  at  6%. 

Mar.  6.     Bought  Mdse.  on  account  from  Parlin  &  Co.,  $420.00. 

Mar.  8.  Received  W.  A.  Hatfield's  10-day  note  at  6%,  for  $200.00,  and  cash  for  lialance  to  cover 
our  bill  of  Mar.  3. 

Mar.  9.  Marshall  Higgins,  6509  Ellis  Ave.,  opened  an  account  with  us  today  by  the  purchase  of 
Mdse.  invoicing  at  $126.75  on  credit. 

Mar.  10.     Borrowed  $2000.00  from  the  Second  National  Bank  for  60  days,  discounting  our  note  at  6%. 

Mar.  11.  Marshall  Higgins  delivered  to  us  on  account  a  note  for  $100.00  which  he  held  against 
W.  H.  Jones,  dated  Mar.  1,  on  which  interest  had  accrued  for  10  days  at  6%. 

Mar.  12.  Redeemed  our  10-day  note  of  Mar.  2  as  follows:  Paid  Mr.  Harms  $125.00  in  cash  to  be 
applied  first  against  the  accrued  interest  and  the  balance  against  the  principal;  issued  our  new  note  for 
30  days  at  7%  for  the  balance. 


as  JOURNALIZING 

Mar.  13.  Marshall  Higgins  returned  for  credit  merchandise  we  had  sold  him  for  $G..50,  and  gave 
his  check  for  the  balance  due  on  the  bill  sold  him  Mar.  9.  (Remember  to  allow  for  the  note  delivered 
to  us  Mar.  11  with  accrued  interest.) 

Mar.  1.5.     Gave  Parlin  &  Co.  our  15-day  note  at  6%  for  the  invoice  bought  of  them  on  Mar.  6. 

Mar.  16.  Borrowed  $1200.00  from  the  First  National  Bank  on  our  60-day  note  at  6%.  The  bank 
required  us  to  pay  the  interest  in  advance;  we  paid  this  out  of  the  S1200.00. 

Mar.  17.  Discounted  at  the  Second  National  Bank  our  60-day  note  for  $800.00.  Rate  of  dis- 
count, 6%. 

Mar.  18.  Presented  for  payment  W.  A.  Hatfield's  note  of  Mar.  8,  and  payment  was  refused.  We 
had  the  note  pretested,  for  which  service  paid  a  notary  public  25(!  as  a  protest  fee.  Debit  W.  A.  Hatfield's 
account  for  the  amount  of  the  note,  $200.00,  and  credit  the  notes  receivable  account,  thus  taking  the 
item  off  of  the  notes  receivable  account  and  putting  it  back  into  the  personal  account.  Debit  Hatfield's 
account  for  the  25^.     Make  one  entry  for  the  entire  transaction. 

A  protest  is  a  formal  statement,  signed  by  a  notary,  to  the  effect  that  he  has  personally  presented 
a  paper  for  payment  and  that  payment  was  refused.  This  definitely  establishes  the  fact  that  the  paper 
has  been  dishonored;  it  is  usually  necessary  that  protest  be  made  and  the  endorser  be  notified  before  an 
endorser  can  be  held  liable. 

Mar.  22.  We  secured  a  judgment  against  W.  A.  Hatfield  for  the  amount  due  us,  $200.00  and  interest 
for  14  days  at  6%,  plus  25^  protest  fee,  and  foreclosed  on  some  property  owned  by  him  to  satisfy  our  claim. 
The  property  was  sold  by  an  officer  of  the  court  for  $215.00,  and  of  this  amount  $.30.00  was  taken  for  court 
costs  and  legal  fees.  The  remainder  was  turned  over  to  us.  There  was  no  other  property  on.  which  we 
could  levy.  This  closes  our  account  with  W.  A.  Hatfield.  The  difference  between  the  amount  of  the 
debt  and  the  amount  finally  realized,  is  a  loss,  and  the  loss  and  gain  account  must  be  debited. 

Mar.  30.     Redeemed  our  note  of  Mar.  12  and  interest  to  date,  in  cash. 

EXERCISE  3 

191—. 

Apr.  1.  Discounted  at  the  bank  a  non-interest-bearing  90-day  note  which  we  held  against  B.  F. 
Adams.  The  note  was  for  $750.00  and  was  dated  Mar.  14.  The  rate  of  discount  charged  by  the  bank 
was  6%. 

Apr.  2.  Discounted  to  R.  L.  McNeal  a  90-day  note  in  our  favor  dated  Mar.  1  and  signed  by  Robt. 
M.  Halsted.     The  note  was  for  $625.00  and  bore  6%  interest.     The  rate  of  discount  was  4^%. 

Apr.  3.  Redeemed  in  cash  our  note  for  $500.00  in  favor  of  Henry  Van  Vleet.  The  note  was  dated 
90  days  ago  and  bore  5%  interest. 

Apr.  4.  On  Feb.  3  we  issued  a  note  in  favor  of  M.  J.  Morris  for  $750.00  at  G%  maturing  May  4. 
Mr.  Morris  offered  to  allow  us  to  discount  this  at  5^0  and  we  gave  him  our  check  for  the  amount  due. 

Apr.  5.  Sold  to  D.  C.  Brown  for  cash  a  60-day  note  which  we  held  against  S.  W.  Baxter.  The  note 
was  for  $750.00,  was  dated  Mar.  2,  and  bore  6%  interest.  Mr.  Brown  charged  for  discounting  it  at  the 
rate  of  5%  a  year. 

Apr.  6.  Harry  K.  Johns  endorsed  over  to  us  on  account  a  60-day  note  signed  by  E.  B.  Hamilton. 
The  note  was  for  $370.00,  was  dated  March  17,  and  bore  7%  interest.  We  accepted  it  at  its  face  plus 
interest  to  date. 

Apr.  7.  Paid  in  cash  F.  O.  Markham's  invoice  for  merchandise  amounting  to  $285.50.  The  invoice 
was  dated  Feb.  1  and  was  sold  on  10  days'  time  with  the  understanding  that  interest  would  be  charged 
at  the  rate  of  6%  per  annum  after  maturity. 

Apr.  8.  Our  account  against  C.  J.  McAllister,  amounting  to  $163.50,  fell  due  on  I'Vb.  26  last,  but 
we  extended  the  time  for  payment  on  condition  that  Mr.  McAllister  would  pay  us  7%  interest  after 
maturity.     McAllister  paid  his  account  and  interest  today. 

Apr.  10.     Discounted  at  the  bank  our  60-day  note  for  $920.00.     Rate  of  discount,  5%. 

Apr.  11.     Loaned  W.  J.  Castle  $100.00,  accepting  his  90-day  note  at  7%. 

Apr.  11.  Discounted  for  cash  the  note  received  from  W.  J.  Castle  today.  The  rate  of  discount 
was  4%. 

Apr.  12.  Bought  from  C.  C.  McLain  merchandise  invoiced  at  $430.00.  In  exchange  we  transferred 
to  him  an  account  which  we  held  against  D.  B.  Potter,  $115.00,  gave  him  our  30-day  note  at  6%  for  $80.00, 
and  paid  him  cash  for  the  balance. 


TEST    IN    CLOSING 


89 


Apr.  13.     W.  r.  Witmer  transferred  to  us  an  account  against  Jackson  &  Co.,  $78.20,  and  gave  us 
his  00-day  note  at  6%  tor  $56.00,  to  apply  on  account. 

Apr!  16.     Bought  from  G.  R.  Tyrrell  for  cash  a  note  which  he  held  against  Keefer  &  Co.  for  $175.00. 
The  note  was  dated  Apr.  1  and  bore  6%  interest.     We  accepted  it  at  its  face  plus  interest  accrued  to  date. 

Apr.  17.     Bought  the  business  owned  by  Geo.  W.  McCaskrin  paying  him  in  cash  the  value  of  his 
total   assets.      His  assets    were: 

Store  and  lot,  $4900.00;  stock  of  Monthly  Statements  to  Customers 

goods  inventoried  at  $-1736.85: 
an  account  against  L.  O. 
Sherman,  $175.00;  and  a  note 
signed  by  Jas.  King,  $96.50, 
upon  wliich  interest  had  accrued 
for  97  days  at  -5%. 


After  completing  the 
foregoing  problems,  pre- 
pare monthly  statements 
for  all  accounts  due  March 
31. 


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Test  in  Closing,  No.  1 

Accompanying  your 
Blanks  No.  1  you  will  find 
four  pages  of  ledger 
accounts  in  the  business 
conducted  by  T.  J.  Reeve. 

1.  Take  a  trial  balance 
of  this  ledger  as  it  stands. 

2.  Prepare  statements, 
using  the  following  inven- 
tories: Real  estate,  $5450.00; 

furniture  and  fixtures,  $720.00;  merchandise,  $0577.52;  wages  unpaid  (a  liabihty  inven- 
tory to  expense),  $35.00;  postage  stamps  on  hand  (a  resource  inventory  to  expense), 
$4.00;  interest  due  us  on  notes  receivable,  $1.10;  interest  due  others  on  notes  payable, 
$8.76. 

3.  Close  all  ledger  accounts  except  the  personal  accounts. 

4.  Take  a  balance  of  the  ledger  as  it  stands  after  closing  as  above  (balance  of  balances). 


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CHAPTER  VI 

CLASSIFICATION  OF  ENTRIES 

Lesson  XXVIII 

THE  SALES  BOOK 

If  there  were  no  other  book  of  original  entry  than  the  journal,  and  if  it  were  necessary 
to  record  in  it  separate  debits  and  credits  for  each  transaction,  afterwards  posting  each 
one  of  these  debits  and  credits  separately  to  the  ledger,  bookkeeping  would  be  a  very 
monotonous  thing  and  very  tedious  in  a  business  of  any  magnitude.  Fortunately,  it  is 
not  necessary  to  adhere  to  this  slow  and  tedious  method.  The  great  majority  of  transac- 
tions are  not  entered  in  the  journal,  but  in  some  special  book  of  original  entry,  transactions 
of  the  same  certain  kind  being  entered  in  the  same  book.  This  not  only  classifies  the 
transactions,  but  through  the  arrangement  of  the  entries  in  the  books  a  great  deal  of 
the  labor  of  writing  and  posting  is  saved.  One  book  of  original  entry  that  helps  the  book- 
keeper to  classify  his  transactions  and  economize  his  labor,  is  the  Sales  Book. 

An  examination  of  your  journal  as  you  have  conducted  it  up  to  date  will  reveal  the 
presence  of  many  entries  in  which  the  merchandise  account  is  credited.  This  entry  occurs 
whenever  merchandise  is  sold.  The  account  debited  may  be  different  in  each  case,  but 
the  merchandise  account  is  always  credited.  When  such  transactions  are  entered  in  the 
journal  there  are  at  least  two  items  written  (a  debit  and  a  credit)  and  two  postings. 
When  a  sales  book  is  kept,  however,  these  transactions  are  omitted  from  the  journal  and 
entered  in  the  sales  book.  The  form  of  the  sales  book  is  much  more  simple,  and  it  requires 
less  posting,  as  you  shall  see. 

Journalize  the  following  transactions  on  loose  sheets  of  paper,  without  explanations: 

191—. 

Oct.  2.  Sold  to  Jno.  R.  Thompson,  1234  State  St.,  on  account,  3  leather-seated 
dining  chairs,  at  $8.50,  $25.50;  1  pedestal  extension  table,  oak,  $40.00,  total,  $65.50. 

Oct.  3.  Sold  to  Gus  E.  Ericson,  3949  N.  Robey  St.,  on  account,  1  extension  dining 
table,  oak,  $27.50;  1  oak  writing  table,  $20.00;  total,  $47-50. 

Oct.  6.  Sold  to  Harry  K.  Feldman,  on  his  10 -day  note  at  6%,  1  white  maple  bed- 
room set,  3  pes.,  $126.50. 

Oct.  9.  Sold  to  Geo.  W.  Chambers,  1239  Main  St.,  on  account,  1  Mission  china 
closet,  $87.75;  6  Mission  oak  dining  chairs,  at  $6.00,  $36.00;  total,  $123.75. 

When  you  have  journalized  the  four  transactions,  compare  your  journal  entries  with 
the  sales  book  entries  on  page  91. 


the  sales  book 
Form  of  Sales  Book,  Unposted 


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Explanation.  In  entering  the  sales  in  the  sales  book,  it  is  always  understood  that 
Merchandise  is  the  account  credited.  Hence  it  is  only  necessary  to  state  the  account 
to  be  debited  without  stating  in  each  case  that  the  merchandise  account  is  credited.  The 
form  shown  is  self-explanatory.  The  separate  amounts  are  later  posted  to  the  debit  side 
of  the  accounts  named,  and  the  total  posted  to  the  credit  of  the  merchandise  account 
at  the  end  of  the  month  or  other  period.  It  is  improper  to  insert  folios  except  at  the 
precise  moment  of  posting,  hence  the  folios  are  not  shown  in  the  above  un^Dosted  form. 

QUESTIONS 

What  is  the  amount  of  the  debit  to  the  account  of  Jno.  R.  Thompson  as  shown  in  your  journal?  In 
the  sales  book? 

What  is  the  amount  of  the  debit  to  the  account  of  Gus.  E.  Ericsou  as  shown  in  your  journal?  In 
the  sales  book? 

What  is  the  amount  of  the  debit  to  the  account  of  Notes  Receivable  as  shown  in  your  journal?  In 
the  sales  book? 

What  is  the  amount  of  the  debit  to  the  account  of  Geo.  W.  Chambers  as  shown  in  your  journal?  In 
the  sales  book? 

How  do  the  debits  in  your  journal  compare  with  the  debits  in  the  sales  book? 


92  CLASSIFICATION    OF    ENTRIES 

What  four  credits  to  the  merchandise  account  are  shown  in  your  journal? 

What  is  the  amount  with  which  the  merchandise  account  is  credited  as  shown  in  the  sales  book? 
How  was  tliis  amount  secured? 

How  does  the  single  merchandise  credit  in  the  sales  book  compare  with  the  total  of  the  four  mer- 
chandise credits  in  your  journal? 

Process  of  Posting  from  the  Sales  Book 

The  separate  entries  are  posted  to  the  debit  side  of  the  account  named,  the  total 
only  being  entered  in  the  ledger  for  each  sale.  As  each  is  enteretl  the  ledger  page  to  which 
it  was  posted  is  entered  in  the  L.  F.  column  of  the  sales  book  and  the  sales  book  page  is 
noted  in  the  ledger.  Periodically,  usually  once  a  month,  the  sales  book  Totals  column 
is  footed,  and  the  amount  of  the  footing  posted  to  the  credit  of  the  merchandise 
account.  When  this  entry  is  made,  the  ledger  page  to  which  the  item  was  posted  is 
entered  in  the  sales  book,  and  the  sales  book  page  is  noted  in  the  ledger. 

Form  of  Sales  Book 

This  is  usually  as  shown  in  the  model.  The  dates  are  sometimes  written  in  the  narrow 
column  at  the  extreme  left.  The  student,  unless  otherwise  instructed,  will  always  follow 
the  forms  shown  in  this  book. 

aXTESTIONS 

How  many  debits  are  posted  from  your  journal  entries  of  the  four  transactions?  How  many  credits? 
How  many  postings  all  told? 

How  many  debits  are  posted  from  the  sales  book  entries  shown  in  the  model  form?  How  many 
credits?     How  many  postings  all  told?     How  many  postings  saved? 

How  many  debits  would  be  posted  from  100  journal  entries  of  sales?  How  many  credits?  How 
many  all  told? 

How  many  debits  would  be  posted  from  100  sales  book  entries?  How  many  credits,  if  all  were  in 
the  same  month  and  the  sales  book  total  were  posted  monthly?  How  many  postings  all  told?  How 
many  postings  saved? 

About  what  percentage  of  the  labor  of  posting  sales  is  saved  when  a  sales  book  is  used  instead  of 
a  journal? 

What  line  of  writing  is  saved  in  every  sales  book  entry?  How  many  times  is  the  total  of  a  sale 
written  in  a  journal?     In  a  sales  book? 

It  is  not  to  be  assumed  that  the  saving  in  labor  of  writing  and  posting  is  the  only 
advantage  or  even  the  principal  advantage  of  a  sales  book.  The  total  of  the  sales  for 
the  month  is  in  itself  information  which  is  valuable  and  it  would  not  always  be  easy  to  get 
this  from  the  ledger  if  sales  were  posted  separately.  When  a  sales  book  is  kept,  the  amount 
of  sales  for  the  month,  week,  or  day  can  be  very  easily  ascertained.  Often  the  recording 
of  sales  is  attended  to  by  one  person,  and  the  general  bookkeeping  by  another,  either 
because  the  volume  of  transactions  recorded  requires  the  services  of  two  persons,  or  for 
some  other  reason.     In  such  a  case,  the  advantages  of  a  separate  sales  book  are  apparent. 

Sometimes  records  of  sales  are  kept  on  the  original  order  sheet  or  sale  ticket  and  posted  from  these 
slips  to  the  debit  side  of  the  accounts  of  the  individual  purchasers,  the  total  being  computed  on  a  separate 
sheet  called  the  "recapitulation  sheet,"  from  which  it  is  posted  to  the  credit  of  the  merchandise  account. 

Make  the  sales  book  entries  for  the  following  transactions,  heading  the  page  "Sales 
Book,  November  1,  191 — ."  Then  post  the  entries  and  take  a  trial  balance.  As  each 
item  is  posted,  write  in  the  L.  F.  column  of  the  sales  book  the  page  of  the  ledger  to  which 


THE    CASH    BOOK,    DEBIT    SIDE 


93 


it  is  posted,  and  in  the  ledger  indicate  the  sales  book  page,  using  the  abbreviation  S  (to 
indicate  Sales  Book)  just  to  the  left  of  the  folio  column,  as  shown  in  the  following 
illustration: 


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Transactions 

191—. 

Nov.  1.  Sold  to  f!co.  H.  Hill,  1239  S.  Water  St.,  on  account,  10  brls.  winesap  apples, 
at  $4.50,  $45.00;  5  hrls.  greenings,  at  $4.35,  .$21.75;  total,  $66.75. 

Nov.  2.  Sold  to  H.  G.  Wells,  1436  Lake  St.,  on  account,  12  brls.  Burbank  potatoes, 
at  $3.90. 

Nov.  3.  Sold  to  J.  R.  Hadley,  on  his  30-day  note  without  interest,  15  brls.  northern 
spy  apples,  at  .$5.50,  .$82..50;  12  brls.  Spitzenbergs,  at  .$6.00,  $72.00;  total,  $154.50. 

Nov.  4.     Sold  to  H.  G.  Wells,  on  account,  9  brls.  Ben  Davis  apples  at  $4.75,  .$42.75. 

Nov.  5.  Sold  to  G.  C.  Claybaugh,  on  his  non-interest-bearing  note  at  15  days,  12 
baskets  California  Bartlett  pears,  at  $1.10,  $13.20;  8  brls.  maiden  blush  apples,  at  .$4.30, 
$34.40;  total,  $47.60. 

Nov.  6.  Sold  to  Geo.  H.  Hill,  on  account,  10  brls.  Burbank  potatoes,  at  $3.90,  $39.00; 
10  bu.  Michigan  peaches,  at  750,  $7..50;  total,  .$46.50. 

Nov.  8.     Sold  to  H.  G.  Wells,  on  account,  8  brls.  northern  spy  apples,  at  $4.50,  $36.00. 

Having  posted  all  the  above  items  to  the  debit  of  the  individual  accounts,  and  the 
total  to  the  credit  of  the  merchandise  account,  you  will  find  that  your  ledger  is  in  balance. 
Test  this  for  vourself,  usina;  loose  sheets. 


Lesson  XXIX 
THE  CASH  BOOK,  DEBIT  SIDE 

Journalize  the  following  transactions  on  loose  sheets  of  paper,  without  explanations: 

191—. 

Oct.  1.     F.  P.  Norbury,  proprietor,  invested  in  business  $5000.00  in  cash. 

Oct.  5.     Received  from  Jno.  R.  Thompson,  on  account,  $50.00  in  cash. 

Oct.  10.     Gus  E.  Ericson  paid  us  $25.00  on  account. 

Oct.  16.  Received  cash  from  Harry  K.  Feldman  to  cover  his  note  of  Oct.  6  in  our 
favor,  $126.50,  and  interest  on  it  for  10  days  at  6%,  $.21. 

Oct.  19.  Received  cash  from  John  R.  Thompson  to  complete  the  payment  of  our 
bill  against  him  of  Oct.  2,  $15.50. 

When  you  have  completed  journalizing  the  foregoing  transactions,  carefully  compare 
your  journal  entries  with  the  entries  shown  in  the  form  on  page  94  headed  "Cash  Dr.' 


94 


classification  of  accounts 
Debit  Side  of  the  Cash  Book,  Unposted 


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Explanation.  The  above  form  is  the  left-hand  page  of  the  cash  book,  which  extends 
across  two  pages,  a  left  and  a  right.  As  you  will  note  from  the  explanatory  headings, 
items  of  Cash  Dr.  are  entered  on  this  page.  Such  items  are  omitted  from  the  journal. 
We  indicate  in  the  cash  book  the  name  of  the  account  to  be  credited.  Cash  is  debited 
in  each  case,  from  the  very  fact  of  the  entry  of  the  amount  on  this  page. 

aUESTIONS 

How  much  is  the  account  of  F.  P.  Norbury  to  be  credited  as  shown  by  the  entry  in  your  journal? 
In  the  cash  book? 

How  much  is  the  account  of  Jno.  R.  Thompson  to  be  credited  as  shown  by  the  entry  in  your  journal? 
In  the  cash  book? 

How  much  is  the  account  of  Gus.  E.  Ericson  to  be  credited  as  shown  by  the  entry  in  your  journal? 
In  the  cash  book? 

How  much  is  the  Notes  Rec.  accoimt  to  be  credited  as  shown  by  the  entry  in  your  journal?  In 
the  cash  book? 

How  much  is  the  interest  account  to  be  credited  as  shown  by  the  entry  in  your  journal?  In  the 
cash  book? 

How  much  is  the  account  of  Jno.  R.  Thompson  to  be  credited  as  shown  by  the  entry  in  your  journal? 
In  the  cash  book? 

How  do  the  credits  in  the  Cash  Dr.  form  above  compare  with  the  credits  in  your  journal? 

What  six  debits  to  the  cash  account  do  you  find  in  your  journal?  What  is  the  sum  of  the  six  debits 
to  the  cash  account  which  your  journal  shows? 

What  is  the  total  of  the  six  debits  to  the  cash  account  in  the  form  above? 

Process  of  Posting  from  the  Debit  Side  of  the  Cash  Book 

The  separate  entries  are  posted  to  the  credit  side  of  the  accounts  named.  The  total 
might  be  posted  to  the  debit  sitle  of  a  Cash  account  in  the  ledger,  thus  preserving  the 


THE    CASH    BOOK,    CREDIT    SIDE  95 

equality  of  debit  and  credit  in  the  ledger,  but  this,  though  sometimes  done,  is  not  cus- 
tomary. The  same  result  is  secured  by  simply  considering  the  cash  book  as  a  part  of 
the  ledger  for  the  purpose  of  taking  a  trial  balance. 

Only  one  side  of  the  cash  book  is  shown  above  and  this  is  self-explanatory  as  to  form. 

Make  the  cash  book  entries  for  the  following  transactions  on  the  first  left-hand 
page  of  your  cash  book,  heading  the  page  "Cash  Dr."  Then  post  the  entries, 
using  loose  ledger  sheets,  and  take  a  trial  balance,  which  should  include  the  Cash 
Dr.  total.  As  each  entry  is  posted,  indicate  in  the  L.  F.  column  of  the  cash  book  the 
'edger  page  to  which  it  was  posted,  and  in  the  ledger  indicate  the  cash  book  page,  using 
the  initial  C  to  indicate  "Cash  Book."  This  initial  should  be  written  just  to  the  left  of 
the  folio  column  in  the  ledger,  as  previously  illustrated  for  the  initial  S  used  in  posting 
from  the  sales  book. 

191—. 

Dec.  1.     A.  B.  Doyle,  proprietor,  invested  in  business  cash,  $7000.00. 

Dec.  2.     Received  from  J.  H.  AVhite,  on  account,  his  check  for  $2 1.3. .50. 

Dec.  3.  G.  V.  Black  gave  us  his  check  for  $42.75  in  settlement  of  our  bill  against 
him  of  Nov.  23. 

Dec.  4.     A.  B.  Doyle  increased  his  cash  investment  $1000.00. 

Dec.  5.     J.  H.  White  paid  $100.00  on  account  in  cash. 

Dec.  6.  Received  G.  V.  Black's  check  for  .$20.20  in  settlement  of  our  bill  against 
him  of  Nov.  26. 

Dec.  9.     Mr.  Doyle  took  in  a  partner,  C.  V.  Henley,  who  invested  $1000.00  in  cash. 

Dec.  10.  Received  cash  for  Henry  Altman's  note  of  Nov.  10,  $500.00,  due  today 
with  interest  for  30  days  at  6%,  $2.50. 

Dec.  11.     Received  a  bank  draft  from  G.  V.  Black  on  account,  $100.00. 

Dec.  12.  J.  H.  White  endorsed  over  to  us  on  account  an  express  money  order  for 
$50.00. 

Dec.  13.     Each  partner  increased  his  investment  $1000  00  in  cash. 

Dec.  15.     G.  V.  Black  gave  us  his  check  for  $12.75  in  full  of  his  account  to  date. 

Dec.  16.  Received  W.  L.  Millard's  check  for  $202.00,  in  settlement  of  the  note  we 
held  against  him  for  $200.00,  maturing  this  day  with  interest  accrued  for  60  days  at  6%. 

Lesson  XXX 

THE  CASH  BOOK,  CREDIT  SIDE 

Journalize  the  following  transactions  on  loose  sheets  of  paper,  without  explanations: 
191—. 

Oct.     1.     Paid  the  rent  for  October  by  check,  $70.00. 

Oct.  2.  Bought  from  the  Sterling  Furniture  Co.,  for  cash,  their  invoice  of  mer- 
chandise No.  2675,  $276.60. 

Oct.    4.     Bought  merchandise  for  cash,  Palmer&  Anderson's  invoice  No.  927,  $364.20. 

Paid  in  cash  the  bookkeeper's  salary  for  the  week  ending  today,  $18.00. 

F.  P.  Norbury,  the  proprietor,  withdrew  in  cash  for  his  personal  use  $25.00. 

Paid  the  bookkeeper's  salary  in  cash  as  on  Oct.  6. 

Paid  cash  for  office  letterheads  and  envelopes,  $7.80. 


Oct. 

6. 

Oct. 

8. 

Oct. 

13. 

Oct. 

18. 

96 


CLASSIFICATION    OF    ACCOUNTS 


Oct.  19.  Bought  merchandise  for  cash  from  The  Hoffman  Co.,  their  invoice  No. 
1348,  $225.60. 

Oct.  20.     Paid  the  bookkeeper's  salary  in  cash  as  on  Oct.  6. 

When  you  have  completed  journalizing  the  foregoing  transactions,  carefully  compare 
your  journal  entries  with  the  entries  in  the  form  shown  below  headed  "Cash  Cr." 


Credit  Side  of  the  Cash  Book,  Unposted 


(Explanation  J 


(-^^o„nt) 


C^rJ: 


/jfeW-/^4^^  6>fe«4- /^. 


0,-g^ 


/a!-J 


Explanation.  The  above  is  the  right-hand  page  of  the  cash  book,  which  as  previously 
stated  extends  across  two  pages,  a  left  hand  and  a  right.  As  j'ou  will  note  from  the 
explanatory  headings,  items  of  Cash  Cr.  are  entered  on  this  page.  Such  items  are  omitted 
from  the  journal.  We  indicate  in  the  cash  book  the  name  of  the  accoimt  to  be  debited. 
Cash  is  credited  in  each  case,  from  the  very  fact  of  the  entry  of  the  item  on  this  page. 


QUESTIONS 

How  much  is  the  expense  account  debited,  in  the  first  entry  in  your  journal?  In  the  cash  book? 
How  much  is  the  merchandise  account  debited,  in  the  second  entry  in  your  journal?  In  the  cash  book? 
How  much  is  the  merchandise  account  debited,  in  the  third  entry  in  your  journal?  In  the  cash  book? 
How  do  the  separate  debits  as  noted  in  the  form  above  compare  with  the  separate  debits  in  your 
journal? 

What  is  credited  in  each  case  in  your  journal? 

What  is  the  total  of  all  the  cash  credits  as  shown  by  your  journal? 

What  is  the  total  amount  credited  to  the  cash  account  as  indicated  above? 


EXERCISE    ON    SALES    BOOK    AND    CASH    BOOK  97 

Process  of  Posting  from  the  Credit  Side  of  the  Cash  Book 

The  separate  entries  are  posted  to  the  dehit  side  of  the  accounts  named.  The  total 
might  be  posted  to  the  credit  side  of  a  Cash  account  in  the  ledger,  thus  preserving  the 
equality  of  debit  and  credit  in  the  ledger,  but  this,  though  sometimes  done,  is  not  cus- 
tomary. The  same  result  is  secured  by  simply  considering  the  cash  book  as  a  part  of 
the  ledger  for  the  purpose  of  taking  a  trial  balance. 

Make  the  cash  book  entries  for  the  following  transactions,  on  the  first  right-hand 
page  of  your  cash  book,  that  is,  just  opposite  the  "Cash  Dr."  page  which  you  have 
written,  heading  the  page  "Cash  Cr."  Then  post  the  entries  to  loose  sheets  and  take  a 
trial  balance,  which  should  include  the  Cash  Cr.  total.  As  each  entry  is  posted,  indi- 
cate in  the  L.  F.  column  of  the  cash  book  the  ledger  page  to  which  it  was  posted,  and 
in  the  ledger  indicate  the  cash  book  page,  writing  the  initial  C,  to  indicate  the  book  from 
which  the  entry  was  posted,  just  to  the  left  of  the  folio  column. 

191—. 

Paid  the  rent  for  December  by  check,  $85.00. 

Bought  from  Stearns  &  Morris,  terms  net  cash,   their    invoice  No.   3214, 

Harmison  &  Co.  sold  us  Mdse.  valued  at  $265.20,    as    per   their   invoice 
We  gave  them  our  check  in  payment. 
Paid  cash  for  500  2<^  stamps. 

Paid  the  salary  of  the  bookkeeper  for  the  week  ending  Dec.  5,  in  cash,  $20.00. 
Paid  by  check  for  our  note  in  favor  of  Hough  &  Co.  and  accrued  interest. 
The  note  was  for  $250.00  and  interest  had  accrued  on  it  for  60  days  at  6%,  $2.50. 

The  proprietor,  A.  B.  Doyle,  withdrew  $30.00  in  cash  for  his  personal  use. 

Paid  for  2  M  letterheads  and  envelopes  in  cash,  $15.50. 

Paid  the  bookkeeper's  salary  as  on  Dec.  5. 

Bought  Mdse.  for  cash,  $240.00.     (Potash  &  Perrin's   invoice  No.  3261.) 

Paid  the  janitor  in  cash  $5.00,  for  special  services. 


Lesson  XXXI 
EXERCISE  ON  SALES  BOOK  AND  CASH  BOOK 

Enter  the  following  transactions  in  the  sales  book  and  cash  book: 

191—. 

Oct.  1.     F.  P.  Norbury,  proprietor,  invested  in  business  $5000.00  in  cash. 

Oct.  1.     Paid  rent  for  October  in  cash,  $70.00. 

Oct.  2.  Bought  merchandise  from  the  Sterling  Furniture  Co.,  for  cash,  their  invoice 
No.  2675,  $276.60. 

It  is  not  necessary  to  itemize  in  the  cash  book  the  merchandise  purchased,  because  we  have  the 
original  invoice,  which  we  will  keep  on  file. 

Oct.  2.  Sold  to  Jno.  R.  Thompson,  1234  State  St.,  on  account,  3  leather-seated 
dining  chairs,  at  $8.50,  $25.50;  1  pedestal  extension  table,  oak,  $40.00;  total,  $65.50. 

Oct.  3.  Sold  to  Gus.  E.  Ericson,  3949  N.  Robey  St.,  on  account,  1  extension  dining 
table,  oak,  $27.50;  1  oak  writing  table,  $20.00;  total,  $47.50. 


Dec. 

1. 

Dec. 

2. 

$167.20. 

Dec. 

2. 

No.  4576. 

V 

Dec. 

4. 

Dec. 

5, 

Dec. 

7. 

The  note 

was 

Dec. 

8. 

Dec. 

10. 

Dec. 

12. 

Dec. 

14. 

Dec. 

15. 

9»  CLASSIFICATION    OF    ACCOUNTS 

Oct.  4.     Bought  merchandise  for  cash,  Palmer  &  Anderson's  invoice  No.  927,  $364.20. 

Oct.  5.     Received  cash  from  Jno.  R.  Thompson  on  account,  $50.00. 

Oct.  6.  Sold  to  Harry  K.  Feldman,  on  his  10-day  note  at  6%,  1  white  maple  bed- 
room set,  3  pes.,  $126.50. 

Oct.  6.     Paid  the  bookkeeper's  salary  for  the  week  ending  today,  in  cash,  $18.00. 

Oct.  8.     F.  P.  Norbury  withdrew  for  his  personal  use  $25.00  in  cash. 

Oct.  9.  Sold  to  Geo.  W.  Chambers,  1239  Main  St.,  on  account,  1  Mission  china 
closet,  $87.75;  6  Mission  oak  dining  chairs,  at  $6.00,  $36.00;  total,  $123.75. 

Oct.  10.     Received  cash  from  Gus.  E.  Ericson,  on  account,  $25.00. 

Oct.  11.  Sold  to  Jno.  R.  Thompson,  on  account,  2  brass  beds  No.  2104,  at  .$32.00, 
$64.00;  2  hair  mattresses,  at  $17.25  each,  $34.50;  total,  $98.50. 

Oct.  13.     Paid  the  bookkeeper's  salary  in  cash  as  on  Oct.  6. 

Oct.  16.  Harry  K.  Feldman  gave  us  his  check  for  $126.71  to  redeem  his  note  of 
Oct.  6,  $126.50,  and  interest  for  10  days  at  6%,  $.21. 

Oct.  17.  Sold  to  Gus.  E.  Ericson,  on  account,  1  colonial  mahoganj-  pedestal,  $52.50; 
1  mission  arm  chair,  $24.25;  total  $76.75. 

Oct.  18.     Paid  for  office  stationery  and  envelopes  in  cash,  $7.80. 

Oct.  19.  Sold  to  Geo.  W.  Chambers,  on  account,  1  oak  extension  dining  table,  $18.75; 
6  oak  dining  chairs,  at  $2.25,  $13.50;  total  $32.25. 

Oct.  19.  Received  cash  from  Jno.  R.  Thompson  to  cor  plete  the  payment  of  our 
bill  against  him  of  Oct.  12,  $15.50. 

Oct.  19.  Bought  merchandise  for  cash  from  The  Hoffman  Co.,  their  invoice  No. 
1348,  $225.60. 

Oct.  20.     Paid  the  bookkeeper's  salary  in  cash  as  on  Oct.  6. 

Oct.  22.  Sold  to  F.  N.  Wright  on  his  30-day  note  at  6%,  the  following  items  for 
his  new  hotel: 


3  oak  dining  tables, 

at  .$12.25, 

$36.75 

12  oak  dining  chairs. 

at      2.50 

30.00 

4  pine  kitchen  tables. 

at      2.75, 

11.00 

6  brass  beds,  No.  2675, 

at      9 .  60, 

57.60 

6  cotton  mattresses, 

at      2.55, 

15.30 

$150.65 

Oct.  23.     F.  P.  Norbury  withdrew  $25.00  in  cash. 

Oct.  24.  Sold  to  Jno  R.  Thompson,  on  account,  1  colonial  bedroom  set,  3  pes., 
$137.75. 

Oct.  25.  Received  from  Gus.  E.  Ericson  cash  to  complete  the  payment  of  our  bill 
against  him  of  Oct.  3,  $22.50. 

Oct.  26.  Bought  merchandise  from  the  Sterling  Furniture  Co.,  for  cash,  their  invoice 
No.  2993,  $420.00. 

Oct.  27.     Paid  the  bookkeeper's  salary  as  on  Oct.  6. 

Oct.  29.     Sold  to  Gus.  E.  Ericson,  on  account,  1  Morris  chair,  oak,  $27.50. 

Oct.  30.  Received  Gus.  E.  Ericson's  check  to  cover  our  bill  against  him  of  Oct. 
17,  .$76.75. 

In  connection  with  your  study  of  the  sales  book  and  the  cash  book  in  preceding 
chapters,  you  were  taught  that  in  posting  from  either  of  these  books  the  book  from  which 
an  item  was  posted  must  be  indicated  by  the  use  of  the  initial  S  or  C,  for  Sales  Book  or 
Cash  Book,  as  the  case  might  be.     The  reason  for  this  is  that  you  are  now  using  three 


EXPLANATIONS    IN   THE    LEDGER  99 

books  of  original  entry  (the  journal,  the  sales  book,  and  the  cash  book),  and  it  is  necessary 
in  connection  with  each  ledger  entry  that  the  book  in  which  it  originated  should  be 
indicated. 

Explanations  in  the  Ledger 

Up  to  this  point  nothing  has  Iseen  said  about  explanations  in  the  ledger  for  entries 
posted  to  it.  This  feature  has  not  been  mentioned,  solely  that  you  might  the  more  easily 
learn  the  process  of  posting.  You  must  now  learn  to  make,  in  connection  with  the  ledger 
entries  posted,  such  explanations  as  are  considered  by  practical  accountants  sufficient  to 
indicate  the  nature  of  the  entry  in  each  case. 

In  posting  from  the  sales  book  the  use  of  the  initial  »S  as  previously  described,  is 
ordinarily  sufficient.  The  bookkeeper  knows,  when  he  sees  the  S  written  in  the  explan- 
atory column  near  the  folio  number  49,  that  the  entry  was  posted  from  the  sales  book, 
page  49.  This  shows  him  that  the  charge  was  for  merchandise,  since  all  sales  book  entries 
are  alike  in  kind. 

Ordinarily  it  also  indicates  the  terms  of  sale,  which  usually  are  the  same  for  all  customers;  but  if  the 
house  sells  a  bill  of  goods  on  terms  other  than  the  regular  terms,  that  fact  should  be  noted  in  the  sales 
book  and  then  noted  m  the  ledger  when  the  entry  is  posted.  Thus,  if  our  regular  terms  are  cash  in  ten 
days  it  is  unnecessary  to  note  this  information  in  the  ledger  whenever  a  sale  is  made  and  posted;  but  if 
we  sell  a  bill  of  goods  on  thirty  days  time,  instead  of  the  usual  ten,  this  should  be  noted  in  the 
explanatory  column  of  the  ledger. 

In  posting  from  the  cash  book,  the  initial  C  is  used  as  previously  described.  This 
is  ordinarily  sufficient,  but  there  are  some  special  cases  in  which  it  is  customary  to  make 
special  explanations.  These  will  be  described  when  you  come  to  them;  for  the  present 
the  initial  C  is  all  the  explanation  you  will  use  in  posting  from  the  cash  book. 

In  posting  from  the  journal,  instead  of  writing  the  initial  J,  it  is  customary  to  write 
in  the  explanatory  column  of  the  ledger  the  name  of  the  account  affected  on  the  other 
side  in  the  same  transaction — or  as  it  is  sometimes  called,  the  contra  account  affected  in 
the  same  transaction.     For  instance,  in  posting  the  journal  entiy. 

Notes  Rec.  $100.00 

Jas.  P.  Smith  .SIOO.OO 

the  explanation  "Jas.  P.  Smith"  would  be  written  in  the  notes  receivable  account  and 
the  explanation  "Notes  Rec".  would  be  written  in  Jas.  P.  Smith's  account.  Any  one 
examining  the  notes  receivable  account  would  see  that  the  note  for  $100.00  was  received 
from  Jas.  P.  Smith;  and  an  examination  of  Jas.  P.  Smith's  account  would  show  that  the 
$100.00  with  which  the  account  stood  credited  was  for  a  note  which  he  had  given.  The 
omission  of  an  initial  indicates  that  the  entry  was  posted  from  the  journal.  The 
initial  J  may  be  used,  however,  if  preferred. 

The  mere  abbreviation  /  would  never  show  the  nature  of  the  entry  and  this  could  not  be  determined 
without  laborious  reference  to  the  journal,  if  there  were  no  explanation  other  than  the  initial.  When 
the  bookkeeper  sees  the  initial  S  or  C,  he  knows  what  the  transaction  was,  but  in  the  case  of  entries  jiosted 
from  the  journal  a  further  explanation  is  customary. 

Special  explanations  are  customary  in  posting  certain  journal  items,  and  in  posting  any  items  to 
certain  accounts.  To  enumerate  all  of  these  at  this  time  is  unnecessary  and  might  be  confusing.  Attention 
will  be  called  to  these  as  occasion  arises  in  each  case. 

The  following  illustration  will  show  the  appearance  of  a  ledger  account  containing 
entries  posted  from  the  journal,  sales  book,  and  cash  book: 


100 


classification  of  accounts 
Illustration  of  a  Ledger  Account  with  Explanations 


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aUESTIONS 

What  kind  of  an  account  is  the  above?  Is  it  a  customer's  account  or  a  creditor's  account? 
What  was  due  on  the  account  on  April  30?  On  May  4?  On  May  6?  On  May  8?  On  May  11?  On 
May  15?  How  did  Mr.  Milton  settle  the  account?  Assuming  that  the  two  entries  dated  May  16  are 
for  the  same  transaction,  tell  what  must  have  taken  place.  What  one  of  the  above  entries  was  posted 
from  the  journal? 


'-°,%'fl  /2./ry    C-flccount  to  ie  credited/  fr.rpUnatinn/ 


f-fr,„ 


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THE    CASH    BOOK,    CLOSED 


.i-or. 


Open  the  following  ledger  accounts,  allowing  for  each  account  the  number  of  lines 
named:  F.  P.  Norbury,  7  lines;  Merchandise,  4  lines;  Expense,  11  lines;  Interest,  5 
lines;  Loss  &  Gain,  8  lines;  Notes  Receivable,  Jno.  R.  Thompson,  Gus.  E.  Ericson,  and 
Geo.  W.  Chambers,  one-fourth  page  each.  Post,  following  the  instructions  for  posting 
previously  studied,  from  the  sales  book  and  from  the  cash  book.  Post  from  the  sales 
book  first,  as  it  would  not  seem  reasonable  to  post  a  payment  from  the  cash  book 
until  the  charge  is  posted  from  the  sales  book.  When  you  have  posted  all  the  sales 
book  items,  post  the  sales  book  total  to  the  credit  of  the  merchandise  account  in  the 
ledger.  In  posting  the  sales  book  total,  use  the  date  Oct.  31  and  use  the  explana- 
tion "Total."  Do  not  post  the  cosh  book  footings.  These  cash  book  footings  (or  the 
cash  balance,  which  amounts  to  the  same  thing),  will  be  included  in  the  trial  balance. 

Take  a  trial  balance.  Balance  the  cash  book,  following  the  form  shown  herewith. 
Date  your  balancing  entry  Oct.  31  and  bring  the  balance  down  as  of  Nov.  1. 

Prepare  statements,  using  the  following  inventory:  Mdse.,  $742.66.  Both  of  the 
statements  and  the  proof  may  be  written  below  the  trial  balance  on  page  1  of  Book  C, 
Blanks  No.  II,  if  no  lines  are  left  blank.     Close  the  ledger. 


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102  CLASSIFICATION    OF    ACCOUNTS 

Lesson  XXXII 

Partnership 

T\Tien  two  or  more  persons  unite  their  money,  goods,  labor,  knowledge  or  skill  in  a  business  enter- 
prise in  which  they  mutually  share  profit  or  loss,  the  business  organization  so  formed  is  a  partnership. 
The  relations  between  partners  give  rise  to  many  of  the  most  interesting  problems  of  accounting. 

Problem  1.  A  and  B  are  partners,  under  an  agreement  to  share  and  share  alike  regardless  of  the 
amounts  of  their  separate  investments.  The  profit  for  the  month  of  January  is  $347.68.  How  much 
does  each  receive? 

Problem  2.  Suppose  that  in  Problem  1  the  arrangement  had  been  that  Mr.  A,  being  the  senior 
partner,  should  always  receive  |  of  the  profits,  and  Mr.  B,  \.     How  much  would  the  share  of  each  have  been? 

Problem  3.  Suppose  that  in  Problem  1,  A's  investment  had  been  $5000.00  and  B's  investment 
had  been  $3000.00  and  the  agreement  had  been  that  they  divide  the  profit  or  loss  in  proportion  to  their 
respective  investments,  what  would  the  share  of  each  have  been? 

Problem  4.  Suppose  the  investments  have  been  as  in  Problem  3,  but  the  agreement  has  been  that 
the  partners  were  each  entitled  to  a  salary  of  $60.00  a  month  to  be  taken  from  the  profits,  the  balance 
being  divided  in  proportion  to  investments.     How  would  the  partners  have  divided  the  $347.68? 

Problem  5.  Suppose  the  investments  had  been  as  in  Problem  3,  but  the  agreement  had  been  that 
each  partner  should  be  allowed  interest  on  his  investment  at  6%,  and  that  the  profit  remaining  should 
be  divided  equally.     How  would  the  partners  have  divided  the  $347.68? 

Problem  6.  Harris,  Dodd,  and  Winthrop  are  partners  with  respective  interests  on  July  1,  1911, 
of  $9000.00,  $7500.00,  and  $6000.00.  During  the  year  ending  July  1,  1912,  the  profits  of  the  business 
were  $7750  00.     State  how  much  profit  each  received,  under  the  following  conditions: 

(a)  Profits  to  be  divided.     Harris,  50%;  Dodd,  30%;  Winthrop,  20%. 

(b)  Profits  to  be  divided  in  proportion  to  investments. 

(c)  Profits  to  be  divided  in  proportion  to  investments  after  each  partner  has  drawn  a  salary  of 
$100.00  a  month. 

(d)  Profits  to  be  divided  share  and  share  alike  after  each  partner  has  been  allowed  interest  on  his 
investment  at  6%. 

Proble.m  7.  Suppose  that  the  investment  of  Harris,  Dodd,  and  Winthrop  on  July  1,  1911,  were 
as  in  problem  6,  but  during  the  ensuing  year  the  following  changes  in  investment  took  place: 

Oct.  1,  1911.     Harris  increased  his  investment  $1500.00. 

Jan.  1,  1912.  Dodd  received  $1000.00  from  Winthrop,  and  assigned  to  him  in  payment  $1000.00 
of  his  interest  in  the  firm. 

Apr.  1,  1912.    Harris  withdrew  $1000.00. 

Present  solutions  for  cases  6,  c,  and  d  as  in  problem  6,  showing  the  amount  of  the  interest  of  each 
partner  on  July  1,  1912,  in  each  of  the  three  cases.  (The  three  accounts  will  have  to  be  averaged  before 
problems  7-b  and  7-c  can  be  solved.     At  the  discretion  of  the  teacher,  these  may  be  omitted.) 

Problem  8.  W.  H.  Heckler's  ledger  shows  that  on  Aug.  1,  191 — ,  his  inventories  were  as  follows: 
Real  Estate,  $7500.00;  Furn.  &  Fix.,  $650.00;  Mdse.,  $5000.00.  During  August  his  purchases  of  Mdse. 
amounted  to  $2500.00,  his  sales  of  Mdse.  amounted  to  $4400.00,  and  his  expenses  were  $250.00. 
On  Aug.  31  his  inventories  were:  Real  Estate,  $7450.00;  Furn.  &  Fix.,  $625.00;  Mdse.,  $3600.00.  What 
was  his  net  gain  for  August? 

Problem  9.  On  Aug.  31,  191 — ,  W.  H.  Heckler's  ledger  showed  the  following  assets:  Cash,  $3400.00; 
Notes  Rec,  $1500.00;  due  from  J.  G.  Cameron,  $450.00.  His  liabilities  on  Aug.  31  were:  Notes  Pay., 
$700.00;  due  Woodbury  &  Co.,  $150.00.  His  inventories  on  Aug.  31  were  as  shown  in  problem  8.  If 
his  net  capital  on  Aug.  1  was  $16,000.00,  what  was  his  net  gain  for  August? 

Problem  10.  What  kind  of  a  statement  did  you  prepare  in  solving  problem  8?  In  solving  problem 
9?     From  the  data  given  in  the  two  problems,  construct  a  trial  balance  as  of  Aug.  31  before  closing. 


CHAPTER  VII 

SET  THREE 

Lesson  XXXIII 
TRANSACTIONS  FOR  APRIL 

Make  entries  for  the  transactions  of  April,  191 — ,  using  the  following  books  of  original 
entry:  The  sales  book,  the  cash  book,  and  the  journal.  Periodically,  as  instructed  through- 
out the  transactions,  you  will  post,  take  trial  balances,  prepare  statements,  etc. 

As  a  matter  of  convenience,  you  may  open  the  ledger  at  this  time.  Allow  for  each 
account  one  line  for  the  heading,  one  line  for  the  year  date,  and  the  number  of  lines  indi- 
cated in  the  following  list: 

FmsT  Page—                                                 Lines  FrrrH  Page —                                                  Lines 

John  A.  Colby,  Partner 9  Blackstone  Hotel,  Michigan  Ave. 

L.  E.  Stacey,  Partner 10  &  Hubbard  PI 10 

Geo.  N.  Miller,  Partner 8  LaSalle  Hotel,  120  LaSalle  St 9 

Real  Estate 9  H.  E.  Wendell,  1024  N.  Robey  St 10 

Second  Page —  Sixth  Page — 

Store  Furniture  &  Fixtures 9  Chas.  E.  Madson,  4279  Indiana  Ave 7 

Merchandise 21  L.  B.  Austin,  6679  Normal  Ave 9 

In-Freight 9  Notes  Payable 7 

Third  Page —  Mortgages  Payable 6 

Interest 15  Seventh  Page — 

Expense 26  Berkey  &  Gay,  Grand  Rapids,  Mich 8 

Fourth  Page—  Rockford  Cabinet  Co.,  Rockford,  111 6 

Loss  &  Gain 17  Imperial  Furniture  Co.,  Grand  Rapids,  Mich.  6 

Notes  Receivable 15  The  Mayhew  Co.,  Milwaukee,  Wis 6 

J.  A.  Stephens,  6941  Emerald  Ave 7 

General  Instructions:  Post  the  entries  from  the  sales  book  at  frequent  intervals 
throughout  the  set.  A  good  bookkeeper  always  keeps  his  sales  po.sted  up  to  date.  It 
is  sometimes  embarrassing  to  have  to  ask  a  customer  after  he  has  paid  his  account,  think- 
ing that  he  has  paid  it  in  full,  to  pay  for  items  that  were  overlooked  at  the  time  settle- 
ment was  made. 

In  posting  to  the  accounts  of  the  proprietors  and  to  the  expense  account,  write  specific 
explanations  in  the  column  provided  in  the  ledger  for  explanations;  these  will  be  sug- 
gested in  connection  with  the  transactions  as  your  work  progresses.  This  is  in  accordance 
wdth  the  general  principle  previously  stated,  that  special  explanations  shall  be  written 
in  the  ledger  when  necessary  in  certain  cases  to  make  the  meaning  of  an  entry  clear. 
When  cash  is  paid  for  expense,  for  instance,  it  is  desirable  that  the  ledger  show  what  the 
money  was  spent  for,  if  items  are  posted  in  detail  to  the  ledger. 

Transactions 
Apr.  1,  191 — .     John  A.  Colby  and  L.  E.  Stacey  are  partners  in  the  furniture  busi- 
ness at  148  Wabash  Ave.,  Chicago,  111.,  under  the  firm  name  Colby  &  Co.     Profits  are 
to  be  divided  in  proportion  to  investments.     The  assets  and  Habilities  of  the  business 
and  the  investments  of  the  proprietors,  on  Apr.  1,  are  as  follows: 

103 


;104 


SET   THREE 


Cash 

Real  estate 

Store  Furniture  &  Fixtures 

Mdse.  Invty.* 

Notes  Receivable 

Interest  on  above 

Blackstone  Hotel 

H.  E.  Wendell 

Notes  Payable 

Interest  on  above 

Berkey  &  Gay 

Rockford  Cabinet  Co. 

Imperial  Furniture  Co. 

John  A.  Colby 

L.  E.  Stacey 


$3246.78 
28000.00 

625.00 
105.50.40 

132.00 
1.10 

560.25 

400.75 


.$2000.00 

7.50 

585.62 

195.30 

225.46 

25314.00 

15188.40 


INVENTORY    OF    STOCK    APRIL    1, 

191-.     (S 

ame  f 

3r  all  lists.) 

STOCK  NO. 

DESCRIPTION 

HOT. 

SOLD 

LEFT 

COST  PRICE 

AMODNT 

102E 

refrigerator 

6 

$10 

75 

$** 

** 

1126 

kitchen  chairs,  elm 

7  dz. 

10 

50 

** 

** 

2936 

kitchen  table,  pine 

25 

2 

10 

** 

** 

No.  6 

Hoosier  kitchen  cabinet 

8 
6 

24 
92 

00 
50 

*** 
*** 

** 

2786 

Colonial  bedroom  set,  4  pes,  mhgy. 

** 

396 

mahogany  dresser 

U 

36 

50 

*** 

** 

4001 

leather-covered  mhgy.  davenport 

15 

62 

50 

*** 

** 

397 

mahogany  dressing  tab'e 

13 

18 

00 

*** 

** 

20  B 

mahogany  phonograph  record  cabinet 

12 

12 

50 

*** 

** 

2787 

Circassian  vv'alnut  dining  room  set,  4  pes. 

9 

110 

00 

*** 

** 

398 

chiffoniers,  Circassian  walnut 

21 

25 

00 

*** 

** 

483 

Mission  china  cabinet,  wea.  oak 

24 

20 

00 

*** 

** 

484 

Mission  dining  table,  wea.  oak 

28 

15 

00 

*** 

** 

486 

Mission  dining  chairs,  wea.  oak 

104 

3 

00 

*** 

** 

485 

Mission  buffet,  weathered  oak 

30 

15 

00 

*** 

** 

Style  E 

auto-valet,  quarter-sawed  oak 

6 

30 

00 

*** 

** 

425 

cheval  glass,  white  maple 

24 

18 

00 

*** 

** 

526 

Flanders  bedstead,  white  maple 

40 

21 

50 

*** 

** 

0016 

brass  bed 

43 

12 

00 

*** 

** 

1006 

iron  bed 

50 

2 

25 

*** 

** 

40  lb. 

hair  mattress 

30 

30 

00 

*** 

** 

600  X 

cotton  mattress 

100 

4 

00 

*** 

** 

2788 

mahogany  parlor  set,  3  pes. 

9 

90 

00 

*** 

** 

1+**** 

** 

Add  5%  for  freight 

*** 

** 

****** 

** 

*It  is  customary  in  retail  furniture  stores  to  keep  a  record  of  each  individual  piece  of  furniture  received. 
This  record  is  kept  in  a  stock  book  or  stock  register,  which  is  an  auxiliary  book.  The  advantages  of  this 
plan  are  many:  The  salesman  has  a  constant  record  of  stock  on  hand,  and  this  record  may  be  extremely 
useful  to  him  in  making  sales;  the  order  clerk  has  no  excuse  for  ever  getting  out  of  stock  on  any  piece  of 
furniture  that  should  be  kept  on  hand;  the  bookkeeper  may  secure  an  inventory  from  the  stock  records 
whenever  he  needs  to  know  it,  without  an  actual  count  of  stock.  In  order  that  you  may  get  some  practice 
in  keeping  such  a  stock  record,  we  present  above  a  list  of  the  furniture  on  hand  at  this  time. 


TRANSACTIONS    FOR    APRIL  105 

Copy  the  foregoing  list,  adding  thereto  as  purchases  are  made  and  also  recording  the  items  sold,  so 
that  at  the  end  of  the  month  you  can  figure  the  inventory  for  yourself;  or  you  may  omit  this  feature  of 
the  work,  as  your  teacher  may  instruct.  The  gross  amount  of  the  inventory  will  be  given  for  the  con- 
venient use  of  those  who  do  not  keep  the  stock  record.  Note  that  every  article  of  furniture  has  a  stock 
number.  This  number  is  a  factory  number  and  constitutes  a  complete  description.  All  items  of  furniture 
except  cheap  chairs  are  bought,  sold,  and  inventoried  by  the  piece,  not  by  the  dozen. 

Enter  the  cash  balance  in  the  cash  book,  in  the  total  column,  and  the  other  balances 
in  the  ledger,  testing  the  ledger  to  make  sure  that  it  is  in  balance  before  proceeding 
further.  Remember  that  the  cash  on  hand  and  the  sales  book  total  must  always  be  included 
in  the  trial  balance.  In  making  the  entries  in  the  ledger,  use  the  explanation  "  Bal- 
ance" or  "Inventory"  as  may  be  proper  in  each  case. 

191—. 

April  1.  Received  cash  from  the  Blackstone  Hotel,  $243.50,  to  settle  our  bill  against 
them  of  Mar.  22. 

The  entry  for  this  transaction  is  made  on  the  debit  side  of  the  cash  book,  in  the  amount  column, 
and  omitted  from  the  journal. 

April  1.     Paid  the  janitor  $2.00  in  cash  for  work  today. 

The  entry  for  this  transaction  is  made  on  the  credit  side  of  the  cash  book,  and  omitted  from  the 
journal.     In  posting,  write  the  word  "Janitor"  in  the  explanation  column  of  the  ledger. 

April  2.     Sold  to  the  LaSalle  Hotel,  120  La  Salle  St.,  on  account  10  days,* 

4  No.  484     Mission  dining  tables,  weathered  oak,  at  124.50  $98.00 

2  No.  485     Mission  buffet,  weathered  oak,  at  $22 .75  45 .  50  $14.3 .  50 

The  entry  for  this  transaction  is  made  in  the  sales  book,  and  omitted  from  the  journal.  The  first 
line  of  the  sales  book  entrj-  should  contain  the  name  of  the  customer,  the  address,  and  in  this  case  the 
terms  "  10  days"  written  just  to  the  left  of  the  first  money  column.  Use  a  very  narrow  margin  in  writing 
the  items,  and  abbreviate  when  possible.     Weathered  may  be  abbreviated  wea. 

April  3.  Bought  from  The  Mayhew  Co.,  Milwaukee,  Wis.,  on  10  days  time,  24 
Flanders  arm-chairs,  No.  527,  fumed  oak,  at  $4.30,  $103.20. 

The  entry  for  this  transaction  cannot  be  made  in  either  of  the  special  books  of  original  entry,  so  it 
must  be  made  in  the  journal,  which  in  this  set  receives  all  entries  which  cannot  be  made  in  the  sales 
book  or  the  cash  book.  ■ 

April  3.     Paid  in  cash  the  freight  bill  for  the  Mdse.  received  from  ililwaukee,  $5.75. 

Make  this  entry  in  the  cash  book,  charging  In-Freight. 

April  4.     Sold  to  H.  E.  Wendell,  1024  N.  Robey  St.,  on  account, 
1  No.  102E     refrigerator  $16. 50 

4  No.  1126  kitchen  chairs,  elm,  at  $1.50  6.00 

1  No.  2936  kitchen  table,  pine  3.75  $26.25 

April  4.  Paid  cash  to  the  Rockford  Cabinet  Co.,  $195.30,  in  settlement  of  a  bill 
bought  from  them  on  Mar.  5,  at  30  days  net. 

TMien  this  entry  is  posted,  rule  up  the  account,  as  this  payment  settles  the  account  in  full. 

April  5.  Sold  to  J.  A.  Stephens,  6941  Emerald  Ave.,  on  account  20  days,  1  No. 
2786  Colonial  bedroom  set,  4  pes.,    mahogany,   $145.00.     (Abbreviate    mahogany  mhgy.) 

April  6.  Bought  from  Berkey  &  Gay,  Grand  Rapids,  Mich.,  net  10  days,  8  No. 
1625  library  tables,  mahogany,  at  $17.50,  $140.00. 

*For  variable  price  lists,  see  page  167. 


106 


SET    THREE 


April  6.     Paid  tlie  freight  bill  on  the  above  in  cash,  $6.50. 

April  6.  Received  a  check  for  .1316.75  from  the  Blackstone  Hotel,  to  cover  our  bill 
of  Mar.  27. 

This  balances  the  account.     WTien  this  entry  is  posted,  rule  up  the  account. 

Api'il  6.  Paid  salaries  for  the  week  ending  today  as  follows:  Geo.  N.  Miller,  book- 
keeper, .$20.00;  Myra  Keating,  stenographer,  .115.00;  H.  R.  Dunn,  salesman,  $12.00; 
total,  $47.00. 

The  explanation  should  show  that  the  salaries  paid  were  for  the  week  ending  today,  and  should  give 
the  name  of  each  employee  and  tlie  amount  paid  to  each.  By  writing  small,  and  interlining,  all  this  can 
be  written  on  two  lines.  The  total  should  be  written  in  the  money  column  opposite  the  last  line  of  explana- 
tion, as  shown  in  the  illustration  below.     In  posting,  use  the  explanation  "  Salaries." 


^:=(h^-^:S4-4^c-i^'4^ 


7 


''^  ^^z^  C^/r-'^^i 


^7 


April  8.     Sold  to  the  LaSalle  Hotel,  on  account, 

6  No.  0016  brass  beds,  at  $18.00,  $108.00 

18  No.  1006  iron  beds,  at  $3.75,  67.50 

24  No.    600  cotton  mattresses,  at  $6.50,  1,56.00 


April  9.  Received  H.  E.  Wendell's  10-day  note  at  6%  for  $427.00,  the  balance  due 
on  his  account  to  date.  By  agreement  the  note  was  dated  April  4,  the  date  of  Mr.  Wen- 
dell's last  purchase. 

When  this  entry  has  been  posted,  rule  and  foot  the  account. 

April  9.  Remitted  to  Berkey  &  Gay  by  bank  draft,  $285  62,  to  cover  their  10-day 
invoice  of  Mar.  31.     Cost  of  the  draft,  $285.62  plus  a  fee  of  100. 

Use  two  lines  in  the  cash  book,  for  this  transaction.  On  one  line  write  the  entry  crediting  cash  and 
debiting  Berkey  &  Gay;  on  the  next  line  enter  the  10^,  debiting  the  expense  account,  all  as  shown  in  the 
illustration  following  the  last  transaction  on  April  6.  In  posting  to  the  expense  account,  use  the  explana- 
tion "Exchange." 

Note.  This  is  the  same  as  a  cash  payment.  To  secure  the  draft,  we  have  to  pay  cash  or  a  check 
to  the  banker  who  issues  it,  including  a  small  fee  for  exchange — in  this  case  10(^. 

For  a  fuller  description  and  illustration  of  a  bank  draft,  see  page  113,  in  the  section  on  "Drafts." 

April  11.  Received  a  check  from  Henry  M.  Rand  for  $133.32  to  cover  his  note  in 
our  favor  for  $132.00  and  accrued  interest  at  6%.  The  note  was  dated  Feb.  10,  and 
interest  was  therefore  due  for  60  days. 

Two  entries  are  made  in  the  cash  book.  In  posting  to  the  notes  receivable  account,  use  as  an 
explanation  the  name  of  the  person  whose  note  was  paid. 


TRANSACTIONS    FOR    APRIL  107 

April  11.     Paid  the  scrubwoman  $1.50  for  work  today. 

Ai)iil  11.     Bought  from  The  Mayhew  Co.,  Milwaukee,  Wis.,  on  30  days  credit,  the 
following: 

6  No.  1346  extension  dining  tables,  oak,  at  $18 .  25,      $109 .  50 
12  No.     625  mahogany  serving  tables,  at  $7 .  50,  90 .  00 

3  No.     600  leather  settees,  at  $18  00,  54 .  00  $253 .  50 


April  11.     Paid  freight  charges  on  the  above  in  cash,  $11.50. 

April  12.     Sold  to  Chas.  E.  Madson,  4279  Indiana  Ave.,  on  account  10  days, 
1  No.  102  E  refrigerator  116  50 

1  No.    20  B  mahogany  phonograph  record  cabinet       20.00  .$30.50 

April  12.  Received  a  check  from  the  LaSalle  Hotel  for  $14,3.50,  in  settlement  of 
the  invoice  sold  them  on  April  2. 

April  13.  L.  B.  Austin,  6679  Normal  Ave.,  arranged  with  us  for  furniture  as  shown 
below,  which  we  delivered  to  him.  He  paid  us  $100.00  in  cash  and  gave  us  his  30-day 
note  at  6%  for  the  balance. 

1  No.  2788  mahogany  parlor  set,  3  pes,  $150.00 

1  No.  2787  Circassian  walnut  dining  room  set,  4  pes,  165.00 

1  No.  2786  Colonial  bedroom  set,  mahogany,  4  pes,  142.50 

1  No.  2936  kitchen  table,  pine,  3 .  50 

6  No.    486  Mission  dining  chairs,  wea.  oak,  at  $4.50,  27.00 

3  No.  1126  kitchen  chairs,  elm,  at  $1.50  each,  4.50 

1  No.  102E  refrigerator,  18.00            $510.50 

Charge  the  entire  bill  through  the  sales  book,  terms  "  Cash  &  note."  Give  credit  for  the  cash,  through 
the  cash  book;  and  for  the  note,  through  the  journal.  When  all  three  items  have  been  posted,  rule  and 
foot  the  account. 

April  13.  Mailed  our  check  to  The  Mayhew  Co.,  Milwaukee,  Wis.,  for  $103.20  to 
cover  their  10-day  bill  of  April  3. 

April  13.     Paid  the  salaries  in  cash  as  on  April  6. 

April  13.  H.  E.  Wendell  paid  us  by  check  the  amount  due  on  his  10-day  note  in 
our  favor  dated  April  4,  $427.00,  and  interest  for  9  days  at  6%,  64 0. 

In  posting  this  entry,  use  as  an  explanation  the  name  of  the  person  whose  note  was  paid 
April  13.     Bought  from  The  Macey  Co.,  Detroit,  Mich.,  for  cash,  32  No.  7  bookcase 
sections,  fumed  oak,  at  $2.00.     (Describe  this  in  the  cash   book  as  "The  Macey  Go's.  Inv. 
No.  1429.")     The  freight  charges  on  this  shipmerit  were  paid  by  the  shipper. 
April  13.     Sold  to  J.  A.  Stephens,  on  account, 

1  No.    397  mahogany  dressing  table,  $28.50 

1  No.    396  mahogany  dresser,  56.50 

1  No.  2788  mahogany  parlor  set,  3  pes,  145.00  $230.00 

Post,  as  follows:  Post  all  the  debits  to  personal  accounts  from  the  sales  book.  Make 
a  lead  pencil  footing  in  the  sales  book,  but  do  not  post  its  total  at  this  time.  Post  all 
the  items  on  the  debit  side  of  the  cash  book  to  the  credit  side  of  the  accounts  named, 
except  the  first  item,  which  is  a  balance  brought  down.  In  posting  the  items  on  Apr.  6 
and  Apr.  14,  follow  instructions  as  to  the  use  of  explanations.  Foot  the  Cash  Dr.  column 
in  lead  pencil  but  do  not  post  the  footing.  Post  all  the  items  on  the  credit  side  of  the 
cash  book  to  the  debit  side  of  the  accounts  named.     In  posting  to  the  debit  of  the  expense 


108  SET    THREE 

account,  make  a  proper  explanation  in  the  ledger  for  each  item.  Foot  the  credit  column 
in  lead  pencil,  but  do  not  post  the  footing.  Post  the  journal  entries,  remembering  to  use 
as  an  explanation  for  each  item  posted  the  name  of  the  account  or  accounts  affected  on 
the  other  side  in  the  same  transaction. 

Take  a  trial  balance,  which  should  include  the  total  footing  of  the  sales  book  and 
the  balance  of  the  cash  book,  which  have  not  been  posted  to  the  ledger. 

April  16.  Mailed  our  check  for  $140.00  to  Berkey  &  Gay  in  settlement  of  their 
10-day  invoice  of  April  6. 

April  17.  Sold  to  Chas.  E.  Madson,  on  account,  1  No.  2787  Circassian  walnut  dining 
room  set,  4  pes.,  $165.00. 

April  17.     Paid  $25.50  for  5M  letterheads  and  envelopes,  printed. 

April  IS.     Bought  from  the  Rockford  Cabinet  Co.,   Rockford,  111.,  on  ."^0  days  time, 

6  No.  336  writing  tables,  mahogany,  at  $11 .00,  $66.00 

5  No.  6^  umbrella  stands,  walnut,  at  $4.00,  20.00  $86.00 

April  18.     Paid  freight  charges  on  the  above  in  cash,  $6.75 

April  18.  Sold  to  the  Blackstone  Hotel  on  account,  24  No.  486  Mission  dining  chairs, 
weathered  oak,  at  $4.50,  $108.00. 

How  to  Forward  the  Sales  Book  Total 

Forward  the  footing  of  the  sales  book  fi'oin  page  3  to  the  top  of  page  4  as  follows; 
Rule  a  single  line  beneath  the  last  entry  in  the  Totals  column  of  page  3.  Foot  the  column, 
writing  the  total  in  ink  below  the  ruUng,  with  the  explanation  "Footing  forwarded." 
Check  in  the  folio  column.  Write  the  same  total  on  the  first  line  below  the  triple  ruling 
at  the  top  of  page  4,  in  the  Totals  column  with  the  explanation  "Footing  brought  for- 
ward."    Check  in  the  folio  column.     The  date  of  the  next  sale  will  head  page  4. 

April  IS.     Paid  cash  for  500  2i  stamps. 

April  18.  Remitted  $300.00  to  Berkey  &  Gay  by  bank  draft,  to  cover  their  30-day 
invoice  of  Mar.   19.     Cost  of  the  draft,   10^?.. 

April  19^^    Bought  from  the  Imperial  Furniture  Co.,  Grand  Rapids,  Mich.,  on  account 
30  days,  12  No.  590  mahogany  rocking  chairs,  at  $9.00,  $108.00. 
April  19.     Sold  to  H.  E.  Wendell,  on  account, 

1  No.  0016  brass  bed,  $18.50 

1  40  lb.  hair  mattress  at  $1.00  a  pound,  40.00  $58.50 

April  20.     Paid  the  salaries  in  cash  as  on  April  6. 
April  22.     Sold  to  the  LaSalle  Hotel,  on  account, 

12  No.  0016  brass  beds,  at  $18 .  50,  $222 .  00 

12  No.  OOOX  cotton  mattresses,  at  $6.50,  78.00  $.300.00 

April  22.  Received  cash  from  Chas.  E.  Madson  to  settle  our  bill  against  him  of 
April  12,  $36..50. 

April  25.  Remitted  $225.46  to  the  Imperial  Furniture  Co.  by  bank  draft  to  cover 
their  30-day  invoice  of  Mar.  26.     Cost  of  draft,  10(i. 

April  25.  Received  cash  from  J.  A.  Stephens  to  settle  our  bill  against  him  of  April 
5,  $145.00. 


TRANSACTIONS    FOR    APRIL  109 

April  26.  Sold  to  Chas.  E.  JIadson  on  account,  1  Style  E  auto-valet,  quarter-sawed 
oak,  $47.50. 

April  27.  Paid  the  salaries  in  cash  as  on  April  6. 

April  29.  Bought  from  Berkey  &  Gay,  on  account,  10  days  net: 

10  No.  4269  Princess  dressers,  birdseye  maple,  at  $21 .00,     S210.00 
8  No.    063  porch  chairs,  wicker,  at  $4.75,  38.00 

5  No.    065  Spanish  swinging  settees,  canvas,  at  $9.25,  46.25  $294.25 

Abbreviate  birdseye  maple  B.  E.  maple. 
April  30.     Sold  to  the  Blackstone  Hotel,  terms  .30-day  note  at  6%, 

2  No.  102E  refrigerators,  at  $15.00  $30.00 

2  Hoosier  kitchen  caljinets.  No.  6,  at  $36.00  72.00 

5  Auto- Valet,  style  E,  at  $42.50  212.50 

2  No.  2788  mhgy  parlor  sets,  3  pes.  each,  at  $125.00  2.50.00 
24  Flanders  arm  chairs,  No.  527,  at  $6.. 00  144.00 

8  library  tables,  mhgy.  No.  1625,  at  $25.00  200.00 

6  No.  336  writing  tables,  mhgy,  at  $15 .25  91 .  50  $1000 .  00 

Make  two  entries,  one  in  the  sales  book  debiting  the  account  of  the  Blackstone  Hotel,  the  other  in 
the  journal,  crediting  the  account  of  the  Blackstone  Hotel. 

April  30.     Sold  to  L.   B.   Austin,  on  account, 

1  No.  102E  refrigerator  $15.75 

5  No.  1126  elm  kitchen  chairs,  at  $1.50  7.50 

3  No.    600  leather  settees,  at  $27.50  82.50  $105.75 


Post,  following  the  instructions  given  on  April  15,  except  that  the  sales  book  total 
is  to  be  posted  to  the  credit  of  the  merchandise  account,  as  previously  described. 

Take  a  trial  balance,  remembering  to  include  the  balance  of  the  cash  book. 

Prepare  statements,  using  the  following  inventories :  i  Interest  receivable  on  L.  B. 
Austin's  note  for  .S410.50,  dated  Apr.  13,  is-days  at  6%,  .ILOuT  Interest  payable  on  our 
note  in  favor  of  C.  B.  Churchill  dated  Mar.  4,  for  $2000.00,  57  days  at  5%,  $15.83.  Salaries 
earned  and  unpaid,  $15.67.  Real  Estate,  $27850.00.  Store  Furn.  &  Fix.,  $618.75. 
Mdse.,  $9420.65.  The  inventories  of  interest  and  salaries  should  be  verified  by  you  before 
you  enter  them.  You  can  verify  the  Mdse.  Invty.*  by  preparing  a  stock  record  as  pre- 
viously described,  adding  5%  to  cost  for  freight  charges. 

The  loss  and  gain  statement  should  be  prepared  in  such  form  as  to  show  In-freight 
as  subordinate  to  Merchandise.  The  illustration  at  the  top  of  page  110  will  give  you 
the  proper  form  for  the  loss  and  gain  statement. 

Close  the  loss  or  gain  accounts.  These  should  be  closed  to  conform  with  the  loss 
and  gain  statement,  which  means  that  In-Freight  should  be  closed  into  Merchandise 
before  Merchandise  is  closed  into  Loss  &  Gain. 

An  Interesting  Bookkeeping  Device 

Some  bookkeepers  like  to  make  canceling  entries  in  the  notes  receivable  and  notes 
payable  accounts  opposite  each  other.  Thus  a  payment  on  Sept.  25  of  a  10-day  note 
for  $100.00  dated  Sept.  15  would  be  written  on  the  same  line  with  the  entry  made  Sept. 

*Invcntory  all  stock  at  last  purchase  price.  If  there  were  no  purchases  during  April,  use  the  cost 
prices  of  the  Apr.  1  inventory. 


110 


SET  THREE 

LOSS  St   GAIN  STATEMENT.  APR.  30,  191- 


GAINS 


Merchandise 

Invty  Apr. 

1 

10550.40 

Purchases 

April 

xxxx.xx 

In. 

•Freight 

April 

XX. XX 

Total  cosi 

XXXXX.XX 

Invty  Apr. 

30 

9420.65 

Cost  of  goods  sold 

XXXX.XX 

Sales  April 

xxxx.xx 

Cost  of  goods  sold 

xxxx.xx 

xxxx.xx 

LOSSES 

Real  Estate 

Dr 

28000.00 

Cr 

Invty 

27850.00 

XXX. XX 

Store  Purn  &  Fix 

Dr 

625.00 

Cr 

Invty 

618.75 

x.xx 

Interest 

Dr 

x.xx 

Dr 

Invty 

15.83 

XX. XX 

Cr 

x.xx 

Cr 

Invty 

1.23 

XX. XX 

x.xx 

Expense 

Dr 

XXX. XX 

Dr 

Invty 

15.67 

XXX. XX 

Net  gain  for  April 


PROOF 


Jno.  A.  Colby 
II 

n 

L.  E.  Stacey 


Net  capital  of  firm  Apr.  30 


Investment 

5/8  of  net  gain 

share  capital  Apr. 30 

Investment 

3/8  of  gain 

share  capital  Apr. 30 


25314.00 

XXX. XX 


XXXXX.XX 


15188.40 

XXX. XX 


XXXXX.XX 


XXXXX.XX 


15,  although  there  might  be  a  blank  line  just  above  it  that  could  have  been  used.  This 
plan  is  not  a  good  one  when  there  are  many  partial  payments,  as  it  would  be  necessary 
in  this  case  to  make  several  entries  on  one  line.  When  this  plan  is  followed,  the  account 
is  never  balanced,  but  whenever  the  items  cancel  down  to  a  certain  line,  the  bookkeeper 
rules  off  all  above  that  line  by  single  line  rulings.  This  latter  device  can  be  applied  to 
any  account  and  will  often  be  found  of  convenience,  especially  in  reducing  the  amount 
of  labor  necessary  to  find  the  balances  due  on  personal  accounts.  Following  is  an  illustra- 
tion of  a  notes  receivable  account  which  illustrates  the  various  points  of  this  paragraph. 
It  is  not  advised  that  the  student  follow  this  form,  which  is  shown  simply  in  order  that 
he  may  become  familiar  with  it. 


Ill 


Q^^. 


^  o 


/3 


2^.'- 


_IJ_^ 


Notes:  The  credit  on  Sept.  13  was  written  on  the  second  line  though  the  first  Une 
was  then  blank.  Later  the  credit  on  Sept.  16  was  entered  on  the  first  line,  opposite  the 
item  canceled  by  the  payment.  It  was  then  observed  that  the  items  above  a  certain 
line  canceled,  and  two  single  lines  were  ruled.  These  single  rulings  are  on  the  same  line 
in  the  form  shown,  but  in  ruling  ofT  personal  accounts  in  the  same  way  it  seldom  happens 
that  the  rulings  are  opposite  each  other.  Part  payments  were  made  to  cover  the  credit 
item  of  Sept.  9,  and  these  are  both  written  on  the  same  line  in  small  handwriting.  The 
line  on  the  credit  side  opposite  the  unpaid  debit  item  of  Sept.  10,  is  left  blank.  The 
balance  is  determined  by  Inspection. 

DRAFTS 

A  Draft  is  an  order  instructing  one  person  to  pay  another  person  a  certain  sum  of 
money  at  a  certain  time.  It  is  assumed  that  the  person  who  issues  an  order  has  a  right 
to  ask  that  the  payment  be  made  as  ordered. 

The  person  drawing  (ordering  that  payment  be  made)  is  called  the  drawer  of  the 
paper.  The  person  drawn  upon  (ordered  to  pay)  is  called  the  drawee.  The  person  to 
whom  payment  is  to  be  made  is  called  the  payee. 

As  to  time  of  payment,  there  are  sight  drafts  and  time  drafts,  the  former  being  pay- 
able at  sight,  the  latter  being  payable  at  a  future  time.  When  payable  at  a  future  date, 
that  date  may  be  specified  in  the  draft,  it  may  be  stated  as  a  certain  number  of  days  or 
months  after  the  date  the  draft  bears,  or  it  may  be  stated  as  a  certain  length  of  time 
"after  sight" — that  is,  after  the  drawee  sees  it. 

A  draft  does  not  become  effective  until  the  drawee  has  paid  it  or  has  agreed  to  pay 
it.  If  it  be  a  sight  draft  it  will  be  paid  at  once,  or  payment  will  be  at  once  refused.  If 
it  be  a  time  draft  the  drawee  will  indicate  (usually  in  writing)  his  willingness  to  pay  it 
when  the  time  comes,  or  will  refuse  at  once  to  be  hable  for  it.  Refusal  to  pay  a  sight 
draft  or  refusal  to  agree  to  pay  a  time  draft  is  called  "dishonoring,"  or  refusing  to  honor, 
the  paper. 

The  drawee  usual'y  indicates  his  willingness  to  pay  a  time  draft  on  the  date  specified 
or  indicated,  by  writing  across  the  left  end  of  the  face  of  the  draft  the  word  "Accepted" 
or  "Good"  or  some  other  word  of  similar  import,  with  the  date  of  acceptance,  and  his 
signature.     The  paper  is  then  called  an  accepted  draft,  or  acceptance. 


112 


SET   THREE 
FORM    OP    DRAFT,    AFTER    ACCEPTANCE 


Explanation:  If  the  above  draft  had  been  written  in  the  form  of  a  letter,  the  letter 
would  have  read  as  follows: 

Chicago,  III,  August  1,  191—. 
J.  W.  Hunter, 

Springfield,  111. 
Dear  Sir: 

At  thirty  days'  sight  (that  is,  thirty  days  after  you  see  this)  pay  to  James  Anderson, 
or  (to  his)  order,  five  hundred  dollars.  (This  draft  is  given  for)  value  (which  has  been) 
received  (by  me).  (When  you  have  paid  the  amount  it  calls  for),  charge  the  same  to 
the  account  of 

(Yours  truly), 

M.  Snowden. 


It  must  be  assumed  that  Mr.  Snowden  had  the  right  to  draw  against  Mr.  Hunter 
for  this  $500.00,  either  because  Mr.  Hunter  owed  him  money  or  because  there  was  an 
agreement  between  the  two  that  Mr.  Snowden's  drafts  would  be  paid.  Otherwise  it 
would  have  been  useless  for  Mr.  Snowden  to  issue  the  draft. 

It  must  also  be  assumed  that  Mr.  Snowden  had  some  reason  to  give  Mr.  Anderson 
the  paper.  We  shall  consider  three  possible  reasons:  (a)  Mr.  Snowden  owed  Mr.  Ander- 
son $500.00  which  he  wished  to  pay  in  this  way.  (b)  Mr.  Anderson,  wishing  to  travel 
from  Chicago  to  Springfield  but  unwilling  to  carry  with  him  $500.00  in  cash,  turned  the 
money  over  to  Mr.  Snowden,  receiving  in  exchange  Snowden's  order  payable  in  cash  in 
Springfield,  (c)  Mr.  Snowden,  wishing  to  collect  $500.00  from  Mr.  Hunter,  used  Mr. 
Anderson  as  his  collector,  expecting  Mr.  Anderson  to  return  the  proceeds  of  the  collection. 

Drafts  all  three  parties  to  which  are  private  individuals  or  firms  are  no  longer  common. 
Yet  they  are  occasionally  found  and  the  relation  of  the  parties  should  be  familiar  to  all. 
Bank  drafts,  however,  and  drafts  through  the  bank,  are  widely  used. 

Drafts  through  the  bank  are  largely  used  for  the  collection  of  bills.  A  iliaft  of 
this  kind  is  one  in  which  the  bank  is  the  payee,  the  creditor  being  the  drawer  and  the 


DRAFTS  113 

debtor  the  drawee.  Following  is  a  form  of  a  draft  through  the  bank.  Drafts  for  collec- 
tion are  usually  in  this  form.  Mr.  Raynor  could  have  made  out  the  draft  in  his  own  favor, 
however,  and  coukl  then  have  endorsed  it  over  to  the  Merchants  Exchange  Bank. 

DRAFT   FOR    COLLECTION 


Bank  Drafts  are  largely  used  for  the  transfer  of  funds  from  one  locality  to  another. 
The  drawer  of  a  bank  draft  is  a  bank;  the  drawee  is  also  a  bank.     The  payee  is  a  person. 


FORM    OF    BANK    DRAFT 


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Bank  drafts  are  usually  payable  at  sight,  or 
at  least  upon  very  short  notice.  If  a  person 
wishes  to  send  or  take  $285.62  from  Chicago  to 
New  York,  he  will  step  into  some  Chicago  bank, 
pay  them  $285.62  (plus  a  possible  exchange 
fee,  for  their  trouble),  and  receive  a  draft 
for  $285.62  upon  some  New  York  bank.     The 


I]NDORSEMENT 


114  SET    THREE 

buyer  can  take  this  draft  to  New  York  and  have  it  cashed,  or  he  may  send  it  to  some 
person  or  bank  in  New  York  to  whom  the  bank  drawn  upon  will  pay  the  money.  A 
draft  may  be  made  in  favor  of  the  buyer  and  by  him  endorsed  over  to  a  person  to  whom 
he  wishes  to  send  the  money  or  the  name  of  that  person  may  be  inserted  by  the  bank 
from  which  the  draft  was  bought.  It  is  preferable  for  the  buyer  of  a  draft  to  have  it 
made  out  in  his  own  favor,  for  his  endorsement  on  it  when  he  transfers  it  to  another 
will  then  be  evidence  that  he  has  paid  money  to  that  other.  The  evidence  will  be  in 
the  hands  of  the  bank  drawing  the  draft,  of  course,  as  the  canceled  draft  will  eventually 
be  returned  to  them  as  the  issuing  bank. 

Explanation:  Ray  E.  Parker  has  bought  a  draft  for  $1800.00  from  Oxley  &  Co.  bankers,  Chicago 
(or  some  one  else  has  bought  it,  having  it  made  out  in  Parker's  favor).  The  draft  is  signed  by  F.  W.  C. 
Holtkamp,  cashier  of  Oxley  &  Co.'s  bank.  It  is  drawn  against  the  First  National  Bank,  New  York. 
Because  it  is  drawn  against  a  bank  in  New  York,  it  is  called  a  "New  York  draft."  Parker's  endorse- 
ment shows  that  he  has  transferred  it  to  the  Western  Grocery  House. 

The  transactions  given  on  page  115  involve  sight  and  time  drafts,  drafts  for 
collection  through  a  bank,   and  bank  drafts. 

Bank  Drafts  received  are  always  assumed  to  be  good,  and  entries  are  made  immedi- 
ately upon  receiving  them.  They  are  entered  as  cash.  Bank  drafts  bought  and  remitted 
are  treated  as  cash  payments  to  the  persons  to  whom  they  are  sent. 

Rule:  When  you  receive  a  bank  draft,  debit  the  cash  account;  credit  the  account 
of  the  person  from  whom,  or  the  thing  for  which,  the  draft  was  received. 

Rule:  When  you  buy  a  bank  draft  for  cash  and  remit  it,  debit  the  account  of  the 
person  to  whom,  or  the  thing  for  which,  the  draft  was  given;  credit  the  cash  account. 

Rule:  When  you  pay  exchange  in  cash,  debit  the  expense  account  or  a  special 
account  called  Exchange;  credit  the  cash  account. 

Drafts  for  Collection.  These  are  sight  drafts  through  the  bank.  Until  paid  by 
the  person  drawn  upon,  such  a  draft  has  no  more  significance  than  a  dunning  letter,  and 
no  entry  is  made  except  possibly  a  memorandum.  If  dishonored,  no  entry  is  made  by 
either  the  drawer  or  drawee.  When  paid,  the  rules  for  the  payment  of  sight  drafts  apply, 
as  given  below.  The  bank's  fee  for  collection  should  be  paid  by  the  drawee,  but  some- 
times the  drawer  is  forced  to  bear  them.  Whoever  pays  such  a  fee  should  debit  the 
expense  account  and  credit  cash. 

Sight  and  Time  Drafts.  Except  in  case  of  bank  drafts,  as  previously  discussed, 
these  should  not  be  assumed  to  be  good  until  honored  (by  payment,  in  the  ca.se  of  a  sight 
draft;  by  acceptance,  in  the  case  of  a  time  draft).  If  dishonored,  no  entries  are  required 
by  either  drawer  or  drawee.  When  honored,  sight  drafts  are  treated  the  same  as  cash 
and  time  drafts  are  considered  the  same  as  notes,  and  the  following  entries  are  made: 

Rule:  When  you  receive  a  sight  draft  and  make  collection  of  the  cash,  debit  the 
cash  account,  credit  the  account  of  the  person  from  whom,  or  the  thing  for  which,  the 
draft  was  received. 

Rule:  When  you  pay  a  sight  draft  in  cash,  debit  the  account  of  the  person  for 
whom,  01  the  thing  for  which,  the  payment  was  made;  credit  the  cash  account. 

Rule:  When  you  receive  a  time  draft  (and  after  the  acceptance  of  the  drawee  has 
been  procured),  debit  the  notes  receivable  account;  credit  the  account  of  the  person  from 
whom,  or  the  thing  for  which,  the  draft  was  received. 


DRAFTS  115 

Etdc:  When  3'ou  accept  a  time  draft,  debit  the  account  of  the  person  for  whom  (at  whose 
order),  or  the  thing  for  which,  the  acceptance  was  given;  credit  the  notes  payable  account. 

Rule:  When  either  a  sight  draft  or  a  time  draft  is  drawn  by  you,  upon  receipt  of 
notice  that  it  has  been  honored  debit  the  account  of  the  person  for  whom  or  the  thing  for 
which  it  was  drawn;  credit  the  account  of  the  person  against  whom  it  was  drawn. 

Rule:  When  you  receive  cash  in  payment  for  another's  acceptance,  debit  the  cash 
account  and  credit  the  notes  receivable  account. 

Ride:  When  you  pay  cash  to  redeem  your  acceptance  in  favor  of  another,  debit 
the  notes  payable  account  and  credit  the  cash  account. 

Journalize  the  following  transactions,  using  loose  sheets.  Assume  that  an  expense 
account  is  kept,  which  is  debited  for  exchange  charges  and  for  collection  charges. 

TRANSACTIONS  TO  BE  JOURNALIZED 

191—. 

Jan.  1.  Received  from  Homer  E.  Stillwell,  on  account,  a  draft  on  the  Hanover  National  Bank, 
New  York  City,  for  $432.65. 

Jan.  2.  Remitted  $625.00  to  the  Remington  Typewriter  Co.,  New  York  City,  on  account,  by  a 
draft  on  the  Merchants  Exchange  Bank,  New  York  City,  bought  at  the  Corn  Exchange  National  Bank, 
this  city.     Exchange,  10(S. 

Jan.  3.  E.  J.  Harmon,  who  has  an  account  with  us,  sent  us  his  draft  on  R.  W.  Long  of  this  city, 
payable  at  sight,  for  $75.00  which  Mr.  Long  owed  him,  asking  us  to  collect  it  and  credit  his  (Harmon's) 
account.     When  we  presented  the  draft  Mr.  Long  gave  us  his  check  for  the  amount. 

Jan.  4.  H.  M.  Waters  of  Cedar  Rapids,  Iowa,  sent  us  on  account  his  draft  on  G.  E.  King  of  this 
city,  payable  in  30  days,  for  $126.50.  We  presented  the  draft  to  Mr.  King  and  procured  his  acceptance. 
Make  the  entry.     What  would  we  have  done  had  Mr.  King  refused  to  honor  the  draft? 

Jan.  5.  The  bank  returned  Mr.  Long's  check  of  Jan.  3  marked  "No  funds."  Make  an  entry  which 
will  adjust  the  matter  on  our  books.  What  two  letters  shall  we  write  and  what  enclosure  shall  we  send 
in  each  letter? 

Jan.  5.  M.  R.  Brown  and  C.  E.  Smith  both  live  in  Indianapolis,  Ind.  We  owe  Mr.  Smith  $50.00 
and  Mr.  Brown  owes  us  $50.00.  A  few  days  ago  we  drew  against  Mr.  Brown  for  $50.00,  payable  at  sight 
to  Mr.  Smith;  today  we  received  word  from  Mr.  Smith  that  the  draft  had  been  honored. 

Jan.  8.  Desiring  to  collect  $78.50  from  B.  \.  Strong,  Champaign,  111.,  we  drew  on  him  recently 
through  the  Citizens'  Bank  of  that  city  for  that  amount.  Today  we  received  a  remittance  from  the  Citi- 
zens' Bank  of  $78.20,  the  bank  having  deducted  30i  for  collection. 

Jan.  9.  Ha\'ing  learned  a  valuable  lesson  from  the  foregoing  transaction,  we  drew  on  D.  B.  Willis, 
Onarga,  111.,  for  $64.50  (the  amount  due  us  from  him),  writing  on  the  draft  the  words  "and  collection 
charges."  The  bank  collected  the  face  of  the  draft  plus  its  fee  for  collection  from  Mr.  Willis,  and  on  Jan. 
11  returned  to  us  $64.50  by  bank  draft. 

Jan.  12.  C.  R.  Hall,  the  proprietor,  wishing  to  take  $500.00  with  him  on  a  business  trip,  bought 
four  bank  drafts  for  $125.00  each,  pajang  40(1,  exchange.  (Debit  the  $500.00  to  the  account  of  the  pro- 
prietor). 

Jan.  13.  Sold  to  A.  C.  Baldwin  Mdse.  invoicing  at  $55.00.  He  endorsed  to  us  a  bank  draft  for 
$75.00  and  we  gave  him  $20.00  change. 

Jan.  15.  We  bought  Mdse.  from  Whitely  &  Co.  invoicing  at  $126.75,  remitting  in  payment  a  bank 
draft  for  the  amount.     Exchange,   10^. 

Jan.  17.  Adams  &  Co.  drew  upon  us  through  the  bank  for  $140.00  which  was  overdue  on  account. 
We  paid  the  draft  plus  35(*  collection  fee. 

Jan.  18.  Having  ordered  from  Greenebaum  &  Sons  Mdse.  billed  at  $720.00,  terms  cash  upon  receipt 
of  bill  of  lading,  we  received  notice  today  that  the  goods  had  arrived  and  that  the  bill  of  lading  (which 
Greenebaum  had  sent  to  the  First  National  Bank  with  sight  draft  on  us  attached)  could  be  secured  by 
calling  at  the  bank  and  paying  the  draft.     We  paid  for  the  draft  and  an  85(#  collection  fee. 

Jan.  20.  Received  and  collected  H.  L.  Morton's  sight  draft  against  P.  D.  Ogden  for  $10.00  due  us 
for  interest  on  a  mortgage. 


116 


SET    THREE 

NOTES 


Date- 

©ur 

Rec'd 

No. 

191  — 

Apr. 

1 

1 

» 

2 

13 

.  3 

30 

4 

May 

2 

5 

Henry  M.  Rand 
H.  e:  Wendell 
L.  B.  Austin 
Blackstone  Hotel 
Chas.  A.  Madson 


In  favor  of 
(Payee) 


Colby  &  Co. 
Colby  &  Co. 
Colby  &  Co, 
Colby  &  Co 
Colby  &  Co. 


Where  Payable 


Maker's  Office 
Maker's  Office 
Maker's  Office 
Maker's  Office 
Maker's  Office 


Bal.of  acct.to  date 

On  bill  of  this  date 

Bill  of  this  date 

In  full  of  acct. 


Date  of 
Paper 


Feb. 
Apr. 
Apr. 
Apr. 
May 


Transactions  for  May 


The  transactions  for  May  are  a  continuation  of  the  traasactions  for  April.  Con- 
tinue the  use  of  the  same  sales  book,  cash  book,  journal  and  ledger.  Begin  writing  the 
May  sales  on  a  new  page  of  the  sales  book.  Continue  the  cash  entries  on  the  same  pages 
of  the  cash  book,  below  the  double  ruling.  Write  the  date  of  the  first  journal  entry  in 
May  in  full,  leaving  about  three  blank  lines  between  the  April  and  May  entries. 


THE  NOTES  RECEIVABLE  AND  NOTES  PAYABLE  BOOKS 

These  two  books  are  introduced  as  auxiliary  books.  Their  purpose  is  to  furnish 
records  of  important  data  concerning  notes  receivable  and  payable,  for  convenient  refer- 
ence. Whenever  a  note  or  acceptance  receivable  is  received,  a  memorandum  is  written 
in  the  notes  receivable  book.  Whenever  a  note  is  issued  or  a  draft  is  accepted,  a  memo- 
randum is  written  in  the  notes  payable  book.  Whenever  a  note  (or  acceptance)  receiv- 
able is  disposed  of  or  a  note  (or.  acceptance)  payable  is  redeemed,  notations  are  made  in 
the  proper  columns.  The  notes  receivable  book  therefore  shows  at  all  times  what  notes 
and  acceptances  are  on  hand,  and  the  notes  payable  book  shows  at  all  times  what  notes 
and  acceptances  are  outstanding  against  us.  The  ledger  shows  the  same  principal  facts 
but  in  less  detail.  The  column  headed  "Face"  in  the  notes  receivable  book  should  show 
the  same  items  as  the  debit  column  of  the  notes  receivable  account  in  the  ledger;  the 
"Disposed  of"  column  should  always  agree  with  the  credit  column  of  the  notes  receivable 
account.  In  the  notes  payable  book,  the  column  headed  "Face"  should  always  agree  with 
the  credit  column  of  the  notes  payable  account  in  the  ledger;  the  "Redeemed"  column 
should  always  correspond  with  the  debit  column  of  the  notes  payable  account.  Notes 
are  presumed  to  be  payable  at  the  maker's  office,  and  drafts  at  the  acceptor's  office, 
unless  otherwise  specified  on  the  face  of  the  paper. 


NOTES 

Date 
Issued 

Our 

No. 

Maker  or  Acceptor 
(Payer) 

In  favor  of 
(Pajee) 

Where  Pa.vable 

Given  for 

Date  of 
Paper 

191— 
Apr. 

1 

1 

Colby  &  Co. 

C.  B.  Churchill 

Our  Office 

Mar. 

4 

THE    NOTES    RECEIVABIiE    AND    NOTES    PAYABLE    BOOKS 


117 


RECEIVABLE 


Rate 
of 

When  due 

Disposed  of 

Time 

. 

0) 

^  1 

Face 

Year 

s 

d 

Q, 

ej 

3 

i* 

^ 

■^ 

0 

a; 

When 

How 

Int.  Reed. 

Amt.  Reed. 

>~i 

fc< 

s 

< 

A 

•-s 

<: 

m 

o 

Z 

0 

Days 

191— 

60 

fi% 

191- 

11 

132 

Apr. 

11 

Check 

1 

32 

133 

32 

10 

6% 

191- 

14 

427 

Apr. 

13 

Check 

64 

427 

64 

30 

6% 

191 

13 

410 

50 

30 

6% 

191- 

30 

1000 

30 

6% 

191- 

1 

212 

60 

Some  accountants  prefer  to  use  the  notes  receivable  and  notes  payable  books  as  books  of  original 
entry.  This  is  done  by  omitting  the  journal  entries  altogether  when  notes  are  received  or  issued  and 
posting  from  the  notes  'receivable  and  notes  payable  books.  This  necessitates  extra  columns  in  these 
books  for  the  name  of  the  account  to  be  posted  to  and  for  the  ledger  folio.  The  plan  is  not  a  good  one, 
because  of  the  great  confusion  that  arises,  as  for  instance  when  a  note  signed  by  one  person  is  received 
from  another. 

The  modelforms  shown  on  pages.  116  and  117  contain  the  proper  memorandums  for 
April.  Study  these  forms  carefully,  and  write  the  memorandums  for  April  in  your  notes 
receivable  and  notes  payable  books.  .  Throughout  May,  you  will  make  the  proper  memo- 
randums in  the  notes  receivable  and  notes  payable  books  at  the  time  of  making  the  original 
entry  in  each  case. 


Transactions,  Continued 


191- 


May  1.  Geo.  N.  Miller,  who  has  been  in  the  employ  of  the  firm  for  some  time,  has 
saved  $2000.00  out  of  his  salary.  He  is  permitted  to  invest  this  amount  in  cash  and 
will  share  in  the  profits  in  the  proportion  which  his  investment  bears  to  the  entire  invest- 
ment.    He  will  continue  to  draw  his  weekly  salary  as  bookkeeper. 

Make  the  entry  in  the  cash  book  with  the  explanation  "Investment,  see  Journal,  page  — ."  Then 
make  a  memorandum  in  the  journal  which  will  explain  the  transaction  in  detail. 

May  1.  Bought  from  Berkey  and  Gay,  terms  10  days  net,  10  No.  065  Spanish  swing- 
ing settees,  canvas,  at  $9.25,  .$92.50.     Paid  freight  charges  on  this  shipment  in  cash,  $3.65. 

May  2.     Sold  to  the  LaSalle  Hotel,  on  account, 

12No.  0016  brass  beds,  at  $17.50  S210.00 

12  No.  1006  iron  beds,  at  $3.75  45.00 

24  No.  600X  coy^on  mattresses,  at  $6 .  50  156 .  00  $411. 00 


PAYABLE 


Rate 
of 
Int 

When  due 

Redeemed 

Time 

Year 

i 

< 

3 

a 

>~i 

3 
< 

1" 

1 

2 

Q 

Face 

When 

How 

Int. 

Amt.  Pd. 

Davs 

60 

5% 

191- 

2000 

191— 
May 

3 

Cash 

16 

67 

2016 

67 

118  SET    THREE 

May  2.  Received  from  Chas.  A.  Maclson  his  30-day  note  at  6%  for  $212.50,  tl:e 
balance  of  his  account  to  date. 

After  making  the  required  journal  entry,  make  a  proper  memorandum  in  tlie  notes  receivable  book. 

May  3.  Our  note  in  favor  of  C.  B.  Churchill  fell  due  today,  and  we  paid  it  in  full 
with  interest.  Face  of  note  $2000.00;  interest  for  60  days  at  5%,  $16.07;  cash  paid, 
$2016.67. 

After  making  the  required  entry,  make  a  proper  memorandum  of  the  payment  in  the  columns  at 
the  right  in  the  notes  payable  book. 

May  3.  Sold  to  J.  A.  Stephens,  on  account,  one  No.  2787  Circassian  walnut  dining 
room  set,  4  pes.   $175.00. 

May  4.     Sold  to  L.  B.  Austin,  on  account, 

1  No.  1346  extension  dining  table,  oak  $31.50 

1  No.  20  B  mhgy.  phonograph  record  cabinet  20.00  S51.50 

May  4.     L.  E.  Stacey,  partner,  withdrew  $1000.00  in  cash. 
In  posting  this  entry  use  the  explanation  "Withdrawal"  in  the  ledger. 
May  4.     Paid  the  salaries  in  cash  as  on  April  6. 
May  5.     Sold  to  the  Blackstone  Hotel,  on  account, 

2  No.  2786  Colonial  bedroom  sets,  4  pes.,  at  $150.00     $300.00 

4  No.  1346  extension  dining  tables,  oak,  at  $24 .50  98 .  00 

12  No.  7  bookcase  sections,  fumed  oak,  at  $3,40  40.80  $438.80 


May  6.     Bought  1000  2t  postage  stamps  for  cash. 

May  7.     Received  a  check  for  $108.00  from  the  Blackstone  Hotel  in  settlement  of 
our  bill  of  Apr.  18. 

May  7.     Sold  to  H.  E.  Wendell,  on  account, 

1  No.  2787  Circassian  walnut  dining  room  set,  4  jjcs.      $175.00 

4  No.  7  bookcase  sections,  fumed  oak,  at  $3 . 60  14.40  $189.40 


May  8.  Received  a  check  for  $331. .50  from  the  LaSalle  Hotel  to  cover  our  bill  of 
Apr.  8. 

May  8.  L.  E.  Stacey,  partner,  again  made  a  withdrawal  of  cash.  This  time  the 
amount  withdrawn  was  $1800.00. 

May  9.  Paid  in  cash  Berkey  &  Gay's  invoice  of  April  29,  $294.25,  sending  them 
a  bank  draft  for  the  amount.     Exchange  on  the  draft,  10^. 

May  9.     Sold  to  L.  B.  Austin  on  account, 

1  No.  2788  mhgy.  parlor  set,  3  pes.  $145.00 

1  No.  6  Hoosier  kitchen  cabinet  37.50 

4  No.  7  bookcase  sections,  fumed  oak,  at  $3.50  14.00  $196.50 

May  10.     Sold  to  the  LaSalle  Hotel,  for  cash, 

5  No.  6i  umbrella  stands,  walnut,  at  $6.75 
1  No.  2788  mhgy.  parlor  set,  3  pes. 
8  No.  063  porch  chairs,  wicker,  at  $7.90  63.20  $246.95 

Since  the  LaSalle  Hotel  has  an  account  with  us,  the  foregoing  tran,saction  should  be  carried  through 
the  ledger.  Debit  the  account  of  the  LaSalle  Hotel  through  the  sales  book,  and  credit  it  through  the 
cash  book.     When  both  entries  have  been  posted,  the  entire  transaction  will  appear  in  the  ledger. 


$33.75 

150 

.00 

63 

.20 

TRANSACTIONS    FOR    MAY  119 

May  11.  Paid  the  Mayhew  Company  in  cash  the  amount  due  on  their  bill  of  April 
11,  $253.50. 

May  11.     Paid  the  salaries  in  cash  as  on  April  6. 

May  11.  Paid  Berkey  and  Gay  by  bank  draft  the  amount  of  their  invoice  of  May 
1,  $92.50.     Exchange,  10^ 

May  13.  Received  cash  from  L.  B.  Austin  for  his  note  of  April  13,  $410.50,  and 
interest  for  30  days  at  6%. 

May  13.  Mr.  Stacey  having  informed  us  that  he  would  need  about  $2500.00  in  cash 
at  once  for  his  personal  use,  we  borrowed  $3000.00  from  the  City  National  Bank  for  six 
months  at  5%,  giving  a  mortgage  on  our  real  estate  to  secure  the  loan.  (Credit  Mort- 
gages Payable.) 

Make  a  memorandum  of  this  mortgage  in  the  notes  payable  book.  Strictly  speaking,  it  does  not 
belong  there,  but  since  we  have  only  one  mortgage  payable  it  may  be  listed  with  the  notes  payable  for 
convenience,  in  order  that  we  may  be  reminded  when  it  falls  due.  The  notes  payable  book  being  only 
a  memorandum  book,  no  harm  can  be  done  by  this  procedure. 

May  13.  L.  E.  Stacey,  partner,  withdrew  in  cash  all  of  his  investment  in  excess  of 
$10,000.00. 

May  13.  Sold  to  H.  E.  Wendell,  on  his  15-day  note  at  6%,  1  No.  278S  mahogany 
parlor  set,  3  pes.,  $150.00. 

Follow  the  instructions  given  in  connection  with  the  sale  to  the  Blackstone  Hotel  on  April  30. 

May  14.  Sold  to  the  Blackstone  Hotel,  receiving  $500.00  in  cash  to  be  applied  on 
the  bill, 

2  No.  27S6  Colonial  bedroom  sets,  mhgy.,  4  pes.  each,  at  $147.50  .$295.00 
6  No.    396  mhgy.  dressers,  at  $51.75  310.50 

6  No.    625  mhgy.  serving  tables,  at  $12.50  75.00  $680.50 

Charge  them  the  amount  of  the  entire  bill.     Give  them  credit  for  the  cash  payment. 

May  14.  Bought  from  The  Mayhew  Co.,  Milwaukee,  Wis.,  6  No.  2787  Circassian 
walnut  dining  room  sets,  4  pes.  each,  at  $110.00,  $660.00.  Gave  them  our  10-day  note 
at  6%  for  the  amount  of  the  bill.     Paid  the  freight  charges  on  the  shipment  in  cash,  $12.78. 

The  purchase  should  be  carried  through  the  ledger,  as  previously  described.  After  the  required 
entries  are  made,  make  the  proper  memorandum  in  the  notes  payable  book.  Hereafter  make  memo- 
randums in  the  notes  receivable  and  payable  book  whenever  necessary.  Remember  this  instruction,  as 
it  will  not  be  given  again. 

Forwarding  the  Cash  Book  Footings 

The  credit  side  of  the  cash  book  is  now  full.  Forward  both  debit  and  credit  foot- 
ings to  the  next  two  pages  of  the  cash  book,  as  follows:  Rule  a  single  line  across  both 
money  columns  on  both  the  debit  page  and  the  credit  page,  on  the  blue  line  on  which  the 
last  credit  item  is  written.  Below  this  line  write  the  footings  of  the  three  columns  in 
which  you  have  figures.  Opposite  the  debit  footings,  write  the  e.xplaaation  "Footings 
forwarded."  Opposite  the  credit  footing,  write  the  explanation  "Footing  forwarded." 
Write  the  cash  book  headings  for  the  next  debit  and  credit  pages  and  on  the  first  line 
below  the  headings  wi-ite  in  the  proper  columns  the  amounts  forwarded,  with  the  explan- 
ation "  Footings  brought  forward  "  on  the  debit  side,  and  the  explanation  "  Footing  brought 
forward,"  on  the  credit  side.  No  entries  after  this  date  are  to  be  written  on  either  of 
the  pages  which  have  been  ruled  and  footed. 

Note.  The  debit  and  credit  footings  are  forwarded  at  the  same  time  as  a  matter  of  convenience. 
Each  page  could  be  forwarded  as  filled,  without  regard  to  the  other  page,  but  it  is  easy  to  see  that  this 
would  occasion  a  great  deal  of  extra  turning  of  pages.     Sometimes  separate  debit  and  credit  books  are  kept. 


120  SET    THREE 

May  15.     Received  a  check  from  J.   A.  Stephens  for  $230.00  in  settlement  of  our 
invoice  of  April  15. 

May  15.     Sold  to  L.  B.  Austin,  on  his  10-day  note  at  6%  (two  entries). 

1  No.  483  Mission  china  cabinet,  weathered  oak  $32.50 

1  No.  484  Mission  dining  table,  weathered  oak  24.00 

1  No.  485  Mission  buffet,  weathered  oak  23.75 

6  No.  486  Mission  dining  chairs,  weathered  oak,  at  $4.50  27.00            $107.25 


Post  all  entries  up  to  date,  but  do  not  post  the  footings  of  the  sales  book.  Take  a 
trial  balance,  which  should  include  the  sales  book  and  cash  book  footings. 

May  15.  L.  E.  Stacey  having  announced  that  he  would  withdraw  from  the  partner- 
ship, $100.00  in  cash  was  paid  to  him  as  his  estimated  share  of  the  May  profits  to  date. 
(Debit  Loss  &  Gain;  credit  Cash.)  In  accordance  with  the  terms  of  a  private  arrange- 
ment between  L.  E.  Stace^  and  Geo.  N.  Miller,  the  balance  of  Mr.  Stacey's  capital  account 
was  transferred  to  the  credit  side  of  Mr.  Miller's  account.  Mr.  Miller  was  paid  his  salary 
up  to  date  in  cash,  $10.00,  and  no  further  salary  was  to  be  paid  to  him. 

May  16.     Sold  to  the  LaSalle  Hotel  the  items  listed  below.      Received  their  10-day 
note  at  6%  to  cover  the  balance  of  their  account,  including  this  invoice.     (Two  entries.) 
4  No.  396  mhgy.  dressers,  at  $51.90  $207.60 

2  No.  2788  mhgy.  parlor  sets,  3  pes.  each,  at  $150.00      300.00  $507.60 

May  IS.  Received  a  check  for  $58.50  from  H.  E.  Wendell  in  payment  of  our  invoice 
of  April  19. 

■  May  18.     Mailed  to  the  Rockford  Cabinet  Co.  our  10-day  note  at  6%  to  cover  their 
bill  of  April  18,  $86.00. 

May  18.  Remitted  $108.00  to  the  Imperial  Furniture  Co.  by  bank  draft,  to  cover 
their  bill  of  April  19.     Cost  of  the  draft,   100. 

May  18.     Paid  salaries  as  follows:    Myra  Keating,  $15.00,  H   R.  Dunn,  $12.50. 

May  20.     Sold  to  H.  E.  Wendell  on  account, 

2  No.    625  mhgy.  serving  tables,  at  $12.75        $25.50 

1  No.  1346  extension  dining  table,  oak  27 .  25  $52 .  75 

May  20.  Bought  from  the  Rockford  Cabinet  Co.,  on  account,  12  No.  336  writing 
tables,  mahogany,  at  $11.00,  $132.00.     Paid  freight  charges  in  cash,  $5.25. 

May  21.  Bought  from  the  Imperial  Furniture  Co.  on  our  30-day  note  at  6%,  48 
No.  590  mhgy.  rocking  chairs,  at  $9.00,  $432.00.     Paid  the  freight  bill  in  cash,  $14.40. 

May  23.     Received  cash  from  H.  E.  Wendell  in  full  of  account. 

To  determine  what  H.  E.  Wendell's  balance  is  it  will  be  necessary  to  examine  not  only  the  ledger, 
but  all  books  of  original  entry  for  transactions  entered  but  not  posted. 

May  24.  Sold  to  the  Blackstone  Hotel,  on  account,  3  No.  6  Hoosier  kitchen  cab- 
inets, at  $.37.50  each,  $112.50. 

May  24.  Paid  The  Mayhew  Co.  in  cash  $601.10,  the  amount  of  our  note  in  their 
favor  dated  May  14  and  interest. 

May  25.  Received  cash  from  L.  B.  Austin  for  his  note  of  May  15,  $107.25,  and 
interest  for  10  days  at  6%,  18 <t. 

May  25.  Received  a  ^h^^  from  the  LaSalle  Hotel  in  settlement  of  their  note  in 
our  favor  dated  May  16,  $i4d^5Vand  interest  for  9  days  at  6%, 40.00.    /•   V  ^ 


TEST    IN   CLOSING  121 

May  25.     Paid  salaries  in  cash  as  on  May  18. 

May  28.  Received  casli  from  H.  E.  Wendell  in  settlement  of  his  note  of  May  13, 
$150.00,  and  interest  for  15  days  at  6%,  38<5. 

May  28.  Remitted  to  the  Rockford  Cabinet  Co.,  by  bank  draft,  $86.14  to  cover 
our  note  of  May  18  and  interest.     Cost  of  the  draft,  10(^. 

May  30.  Received  a  check  from  the  Blackstone  Hotel  for  $1005.00,  to  cover  their 
note  of  April  30  and  interest  for  30  days  at  6%. 

May  30.  Received  L.  B.  Austin's  check  for  $105.75  in  settlement  of  our  bill  of 
April  30. 

May  31.  Inventories:  Real  estate,  $27700.00;  store  furniture  and  fixtures,  $612.50; 
merchandise,  $8581  18*;  interest  on  Chas.  A.  Madson's  note  for  $212.50,  dated  May  2,  29 
days  at  6%,  $1.03;  interest  on  our  note  in  favor  of  the  Imperial  Furniture  Co.  for  $432.00, 
10  days  at  6%,  720;  interegj  jon  our  mortgage  in  favor  of  the  City  National  Bank, 
$3000.00  for  18  days  at  5%,  SlO.O'OTsalaries  earned  and  unpaid,  $22.92. 

Take  a  trial  balance  and  prepare  statements.  The  net  gam  will  be  divided:  Colby, 
77%;  Miller,  23%.  Students  who  understand  how  to  determine  each  partner's  propor- 
tion when  changes  in  investment  are  made  during  the  month,  should  verify  these  per- 
centages.    Close  the  ledger.     Prepare  a  balance  of  the  closed  ledger. 

Test  in  Closing  No.  II 

At  this  point  perform  the  work  of  the  second  test  in  closing,  as  follows:  (1)  Take  a 
trial  balance.  (2)  Prepare  statements,  using  the  following  inventories:  Real  Estate, 
$13450.00;  furniture  and  fixtures,  $1000.00;  merchandise,  $9450.00;  interest  receivable, 
$13.50;  interest  payable,  $10.20,  salaries  unpaid,  $8.00.  The  proprietors  share  gains  and 
losses  in  proportion  to  investment.  (3)  Close  the  ledger  (except  personal  accounts  and 
the  partners'  accounts),  dating  the  balances  and  inventories  brought  down  as  of  Feb.  28 
instead  of  March  1  as  you  ordinarily  would.  In  preparing  the  loss  and  gain  statement 
and  in  closing  the  ledger,  In- Freight  is  to  be  treated  as  a  part  of  the  cost  of  Mdse.  (4) 
Take  a  balance  of  the  closed  ledger. 

Closing  Out  the  Business 

After  your  balance  of  the  closed  ledger  has  been  proved,  open  a  cash  book  with  the 
proper  balance  and  make  entries  for  the  following  transactions,  dating  all  transactions 
Feb.  28. 

Sold  all  merchandise  on  hand  for  cash  at  the  inventory  price. 

Paid  in  cash  all  accounts  payable. 

Collected  cash  in  full  of  all  accounts  receivable. 

Paid  the  mortgage  and  all  notes  payable,  including  accrued  interest,  in  cash. 

Sold  the  real  estate  on  hand  for  cash,  at  the  price  at  which  it  was  inventoried. 

Received  cash  for  all  notes  receivable  and  accrued  interest. 

Divided  the  cash  on  hand  between  the  partners  in  proportion  to  investment. 

*The  amount  of  the  above  inventory  will  vary  for  the  different  lists  as  follows: 

List      1,  as  given,  $8581.18  Lists  23  to  29,  inclusive,      S8532.88 

Lists    2  to    8,  inclusive     $8510.83  Lists  30  to  36,  inclusive,     $8557.03 

Lists    9  to  15,  inclusive     $8534.98  Lists  37  to  43,  inclusive,     $8581.18 

Lists  16  to  22,  inclusive     $8559.13  Lists  44  to  50,  inclusive,      $8605.33 

In  verifying  the  inventory,  use  the  last  purchase  price  on  articles  purchased  since  May  1.     On  all 
other  articles,  use  the  costs  given  in  the  May  1  inventory. 


122  MISCELLANEOUS    INFORMATION 

Post  all  cash  book  entries  and  rule  the  cash  book  to  close. 

Rule  all  ledger  accounts  to  close. 

There  being  no  assets  or  liabilities  or  investments,  the  business  has  ceased  to  exist. 

The  Loose-Leaf  Ledger 

The  ledger  sometimes  consists  of  loose  sheets  which  are  fastened  together  in  a  binder 
and  this  kind  of  a  book  is  just  as  satisfactory  as  any  other  if  the  loose  sheets  are  not  lost. 
The  principal  advantages  of  the  loose-leaf  ledger  are:  (1)  The  bookkeeper  may  arrange 
his  accounts  alphabetically,  thus  making  it  unnecessary  to  index  the  book  and  at  the 
same  time  enabling  the  bookkeeper  to  save  the  time  that  under  the  bound  book  system 
would  be  lost  in  consulting  the  index.  (2)  Old  accounts  may  be  removed  from  the  cur- 
rent binder,  in  which  current  (active)  and  open  accounts  are  kept,  and  placed  in  a  "trans- 
fer" binder,  where  they  can  be  kept  until  opened  again  by  new  transactions.  This 
materially  reduces  the  number  of  accounts  in  the  current  binder,  making  it  easier  to 
handle,  and  easier  to  keep  track  of  the  open  accounts. 

Loose-leaf  devices  are  not  by  any  means  confined  to  the  ledger,  but  are  used  for  many 
of  the  books  of  original  entry,  where  they  are  often  found  to  be  even  more  effective  in  the 
saving  of  time  and  labor. 

Special  Ruled  Ledgers 

While  the  old-fashioned  center  ruled  ledger  is  the  best  for  general  purposes,  it  is  not 
unusual  for  ledgers  to  be  specially  ruled  to  suit  peculiar  needs  in  certam  lines  of  business 
or  to  conform  to  the  differing  ideas  of  bookkeepers.  One  special  form  which  is  used  con- 
siderably for  personal  accounts  when  cash  discounts  enter  into  the  settlements,  is  a  form 
which  provides  a  narrow  column  at  the  left  of  the  column  in  which  the  cash  payments 
are  entered.  In  this  narrow  column  are  recorded  the  cash  discounts.  Each  payment 
and  its  corresponding  discount  are  thus  side  by  side  the  same  as  they  are  in  the  cash 
book.  For  accounts  receivable,  this  extra  column  is  on  the  debit  side.  For  accounts 
payable,  it  is  on  the  credit  side.  The  cash  payment  and  discount  in  each  case  may  be 
written  on  the  line  on  which  the  amount  of  the  invoice  appears,  or  this  feature  may  be 
disregarded. 

Discount 

Trade  Discount.  When  a  certain  per  cent  is  deducted  from  the  listed  price  of  an 
article  to  arrive  at  the  real  selling  price,  such  a  deduction  is  called  a  trade  discount.  This 
deduction  might  indicate  that  the  price  has  been  lowered  since  the  present  list  price  was 
established;  it  might  be  a  reduction  made  as  an  inducement  for  a  sale;  it  might  be  that 
trade  discounts  are  used  merely  as  a  means  of  regulating  prices  without  changing  the 
prices  published  in  the  catalog;  or  it  might  be  that  the  same  catalogs  are  sent  to  all  kinds 
of  firms  antl  the  prices  to  each  regulated  through  trade  discounts.  Trade  discounts  are 
taken  off  the  invoices  when  they  are  made  out,  and  do  not  appear  on  the  books. 

Cash  Discount.  After  an  article  has  been  sold  at  a  certain  price,  the  seller  will  often 
offer  a  cash  discount  in  order  to  induce  a  payment  of  cash  within  a  certain  time.  For 
instance,  one  might  sell  goods  on  60  days  time,  but  offer  a  special  discount  of  2%  for 
spot  cash  or  for  cash  in  ten  days.     The.se  items  are  entered  in  a  "Cash  Discount"  account. 

Discount  for  the  Use  of  Money.  This  is  classed  with  interest,  the  ledger  account  being 
named  "Interest  and  Discount."     You  are  already  familiar  with  this  kind  of  discount. 


MISCELLANEOUS    INFORMATION 


123 


Some  bookkeepers  make  no  distinction  between  cash  discount  and  discount  for  the  use  of  money 
and  in  some  lines  of  business  it  is  extremely  difficult  to  make  this  distinction,  as  when  a  cash  discount 
is  offered  for  payment  within,  say,  10  days  from  the  date  of  a  bill  and,  in  addition  to  this,  discount  at  regular 
rates  is  allowed  if  the  customer  wishes  to  pay  even  before  the  discount  date.  When  bills  are  dated  several 
months  ahead  a  great  deal  of  this  extra  discounting  is  done  and  it  would  require  much  extra  figuring  to 
keep  the  two  kinds  of  discount  separate.  Failure  to  distinguish  between  these  two  kinds  of  discount 
is  theoretically  wrong,  but  the  general  custom  in  a  given  business  should  be  followed. 


Analyzing  an  Account 

Often  it  is  desirable  to  determine  certain  facts  in  regard  to  an  account  which  are 
not  shown  in  the  footings  and  general  result  of  the  account.  Suppose,  for  instance,  that 
a  general  expense  account  is  kept  in  which  all  expense  'tems  are  entered,  but  for  some 
particular  reason  it  is  desired  to  show  the  amounts  of  different  kinds  of  expen-e  items, 
as  advertising,  postage,  etc.,  throughout  a  certain  past  period.  In  this  case,  an  analysis 
sheet  may  be  prepared  which  will  show  these  facts. 

Assume  that  the  expense  account  in  the  ledger  appears  as  follows  for  the  month  of 
October,  191—. 

EXPENSE 
191— 


Oct. 


Rent 

Advertising 

Exchange 

Salaries  and  wages 

Collection 

Advertising 

Electric  Light 

Salaries  and  wages 

Postage 

Advertising 

Salaries  and  wages 

Advertising 

Stationery 

Salaries  and  wages 

Advertising 


/o 

10 

50 
10 

37 

50 
20 

8 

75 

3 

50 

39 

25 

10 

7 

50 

35 

75 

12 

90 

4 

50 

36 

50 

6 

25 

288 

20 

An  analysis  sheet  might  be  prepared  as  illustrated  below,  assuming  that  this  gives 
the  desired  information. 

Analysis  of  Expenses  for  October,  191 — 


ADVERTISING 


SALARIES  &   WAGES 


37 

50 

39 

25 

35 

75 

36 

50 

MISCELLANEOUS 

75.00 

.10 

.20 

3. 50 

10.00 

4.50 

93.30 

Adv'g. 

45.90 

S&  W 

149.00 

124 


MISCELLANEOUS   INFORMATION 


Such  an  analysis  can  be  made  so  as  to  give  any  information  desired.  If  information  as  above  were 
desired  at  every  closing  of  the  ledger,  of  course,  it  would  be  better  to  keep  separate  accounts  in  the  ledger 
for  advertising  and  for  salaries  and  wages;  so  that  a  knowledge  of  the  above  form  is  of  value,  generally 
speaking,  only  when  an  analysis  is  desired  of  jjast  expenses  which  have  not  been  entered  in  separate 
accounts.  The  form  has  a  wide  application,  however.  It  can  be  used  for  analyzing  personal  accounts 
to  show  what  proportion  of  bills  are  discounted.  The  credit  side  of  the  merchandise  account  (or  the 
sales  book,  if  only  one  sales  book  be  kept)  can  be  analyzed  to  show  how  the  sales  compare  in  different 
departments  of  the  business,  in  different  states  or  other  divisions  of  territory  covered,  or  by  salesmen. 
There  are  dozens  of  other  ways  in  which  such  forms  can  be  used. 

When  separate  accounts  are  kept  for  advertising  and  for  salaries  and  wages,  or  when 
analysis  sheets  are  prepared  every  month,  these  can  be  recapitulated  to  show  general 
results  for  the  year,  half-year,  or  quarter,  as  follows; 


Analysis  of  Expenses  for  the  Quarter  from  Oct.  1,  191 —  to  Jan.  1,  191 — 


October 

November 

December 


ADVERTISING 

SALARIES 
&  WAGES 

MISCEL- 
LANEOUS 

45.90 
56.75 
42.20 

144.85 

149.00 
162.25. 
1.38.62 

449.87 

93.30 
98.50 
92.25 

284.05 

288.20 
317.50 
273.07 


The  recapitulation  form  shown  above,  like  the  form  of  analysis  sheet  shown  previously,  may  be 
adapted  in  dozens  of  ways  to  give  valuable  information.  The  bookkeeper  should  be  clever  in  devising 
for  his  own  use  such  supplementary  forms  as  will  set  before  his  employer  in  graphic  form  any  special  infor- 
mation or  summaries  which  may  be  requested  or  desired. 

Exercise.  Write  the  following  in  sales  book  form  and  prepare  an  analysis  sheet 
showing  the  business  done  as  by  States.  The  separate  items  of  each  invoice  are  omitted 
for  the  sake  of  brevity. 


Nov. 


9. 
12. 
13. 
15. 
16. 
19. 
20. 
21. 
22. 
26! 
27. 
28. 
30. 


H.  K.  Williams,  Chicago,  III., 
E.  C.  Millard,  Oskaloosa,  la., 
S.  E.  Walton,  Indianapolis,  Ind., 
S.  H.  Block,  Peoria,  111., 
K.  V.  Handel,  Terre  Haute,  Ind., 
E.  B.  Baves,  Dubuque,  la., 
T,  B.  Boyd,  St.  Louis,  Mo., 
H.  E.  Devore,  Springfield,  111., 
R.  L.  McNeal,  St.  Joseph,  Mo., 

E.  J.  Sneed,  Springfield,  Mo., 
T.  J.  Adams,  Keokuk,  la., 

A.  B.  Dick,  Charieston,  111., 

B.  L.  Admore,  Gary,  Ind., 
H.  K.  AVilliams,  Chicago,  111., 

F.  E.  Giles,  Crawfordsville,  Ind., 
W.  B.  Cook,  Jefferson  City,  Mo., 
D.  L.  Dover,  Cedar  Rapids,  la., 
F.  B.  Boyd,  St.  Louis,  Mo., 

S.  J.  Stephens,  E.  St.  Louis,  111., 
J.  R.  McCormick,  Terre  Haute,  Ind., 


TERMS 

AMOUNT 

2/10  n/30 

$123.62 

3/10  n/30 

243 . 72 

1/10  n/30 

326.29 

2/10  n/30 

285.62 

1/10  n/30 

141.32 

3/10  n/30 

.325.10 

2/10  n/30 

273.08 

2/10  n/30 

249.46 

2/10  n/10 

387.65 

2/10  n/30 

457.45 

3/10  n/30 

386.23 

2/10  n/.30 

299.71 

1/10  n/30 

148.09 

2/10  n/.30 

386.25 

1/10  n/.30 

243.96 

2/10  n/30 

129.45 

3/10  n/30 

2.56.24 

2/10  n/.30 

393.26 

2/10  n/30 

245.50 

1/10  u/30 

352.30 

MISCELLANEOUS    INFORMATION  125 

The  concern  making  the  sales  listed  in  the  foregoing  form   prepays  freight  charges  and  attempts 

to  equalize  the  loss  on   this   item   by   adjusting   the   discounts  differently   in  different  states.  In  what 
state  do  you  think  the  business  is  located? 


Closing  the  Ledger  Through  Journal  Entries 

Up  to  this  time  you  have  followed  the  plan  of  closing  all  ledger  accounts  through 
entries  made  directly  on  the  face  of  the  ledger.  Another  plan  which  accomplishes  the 
same  results  in  a  different  way  is  to  make  journal  entries  for  all  closings  which  when  posted 
to  the  ledger  will  leave  the  affected  accounts  in  exactly  the  same  condition  as  though 
the  entries  had  been  made  directly  in  the  ledger. 

When  closings  are  made  through  journal  entries,  it  is  an  entirely  feasible  plan 
and  one  often  followed  to  dispense  with  red  ink  altogether  in  the  ledger  except  for 
ruling  purposes.  The  cash  account  is  kept  in  a  separate  book,  the  notes  receivable 
and  notes  payable  accounts  are  left  open,  as  you  have  learned  to  do  in  case  of 
the  personal  accounts,  and  the  closing  entries  are  posted  from  the  journal  in 
black  ink. 

In  performing  the  work  required  for  the  following  exercises  you  will  use  no  red  ink 
except  for  ruling  purposes. 

Using  loose  sheets,  spread  on  the  letlger  the  facts  shown  in  Exercise  1,  and  prepare 
statements.     Then  close  the  ledger  by  the  journal  method,  proceeding  as  follows: 

1.  Open  a  temporary  account  called  Miscellaneous  Inventories. 

2.  Make  journal  entries  debiting  the  miscellaneous  inventories  account  for  all  asset  inventories  and 
crediting  the  several  accounts  in  which  the  inventories  belong.  (If  you  prefer,  you  may  combine  all  these 
in  one  entry.) 

3.  Make  journal  entries  crediting  tlie  miscellaneous  inventories  account  for  all  liability  inventories 
and  debiting  the  several  accounts  in  which  the  inventories  belong.  (If  you  prefer,  you  may  combine  all 
these  in  one  entry.) 

4.  Post  all  the  foregoing  entries. 

5.  Make  journal  entries  debiting  Loss  &  Gain  and  crediting  the  several  accounts  showing  loss.  (If 
you  prefer,  you  may  combine  all  these  in  one  entry.) 

6.  Make  journal  entries  crediting  Loss  &  Gain  and  debiting  the  several  accounts  showing  gain.  (If 
you  prefer,  you  may  combine  all  these  in  one  entry.) 

7.  Post  all  the  entries  you  made  in  steps  5  and  6.  The  loss  or  gain  accounts  all  balance  now,  and 
may  be  ruled. 

The  inventories  are  all  represented  in  the  miscellaneous  inventories  account  at  this  time.  To  get 
them  back  in  their  proper  accounts,  jjroceed  as  described  in  steps  8,  9  and  10. 

8.  Make  journal  entries  debiting  the  miscellaneous  inventories  account  for  all  liability  inventories 
and  crediting  the  several  accounts  in  which  these  inventories  belong.  (If  you  prefer,  you  may  combine 
all  these  in  one  entry.) 

9.  Make  journal  entries  crediting  the  miscellaneous  inventories  account  for  all  asset  inventories 
and  debiting  the  several  accounts  in  which  these  inventories  belong.  (If  you  prefer,  you  may  combine 
all  these  in  one  entry.) 

10.  Post  all  the  entries  you  made  in  steps  8  and  9. 

11.  Make  journal  entries  debiting  Loss  &  Gain  and  crediting  each  partner  for  one  half  of  the  net 
gain,  and  post  them.  (If  you  prefer,  you  may  combine  these  in  one  entry.)  If  a  net  loss  be  shown, 
reverse  the  entries.     Close  Loss  &  Gain,  but  leave  the  accounts  of  the  partners  open. 

The  ledger  should  now  be  in  exactly  the  same  condition  it  would  have  been  in  had  the  closing  been 
done  directly  in  the  ledger. 


126 


MISCELLANEOUS    INFORMATION 

Exercise  I 


Chas.  E.  Woods,  Partner 
Geo.  R.  Davis,  Partner. . 
Furniture  &  Fixtures . .  . . 

Merchandise 

Interest 

Expense  

Cash 

Notes  Receivable 

Jas.  E.  Ryan 

H.  R.  Smith 

A.  M.  Duncan 

Notes  Payable 

J.  E.  Baker 

Jerome  B.  Howard  &  Co 
Alma  Mfg.  Co 


500 

5508 

95 

11 

87 

105 

20 

1241 

68 

1587 

50 

115 

162 

60 

116 

3020 
1400 


1339 
414 
250 
644 


Inventories:  Mdse,  $4125.00;  furniture  &  fixtures,  $450.00;  coal  on  hand  which  had  been  charged 
to  the  expense  account,  $12.50. 

In  performing  the  work  of  Exercise  II,  follow  the  instructions  given  above  for  Exercise  I,  except 
that  you  must  divide  the  gain  or  loss  between  the  partners  in  proportion  to  investment. 


Exercise  II 


G.  E.  Albrecht,  Partner. . . 
John  H.  Stehman,  Partner 

Real  Estate 

Furn.  &  Fix 

Merchandise 

Cash  Discount 

Interest  &  Discount 

Expense 

Cash 

Notes  Receivable 

Accounts  Receivable 

Notes  Payable 

Accounts  Payable 


8800 

1275 

52925 


5216 
9060 
19510 
13426 


22000 
15000 


66040 

850 
46 


4500 
1776 


Inventories:  Real  Estate,  $8600.00;  furniture  and  fixtures,  $1200.00;  merchandise,  $1.5241.62; 
expense  items  on  hand,  $350.00.  Note  that  separate  personal  accounts  are  not  shown,  but  that  accounts 
receivable  are  shown  in  one  item  and  accounts  payable  in  one  item. 

Many  things  can  be  said  in  favor  of  the  plan  of  journalizing  the  closing  entries  and  against  it.  State 
what  you  consider  to  be  the  advantages  and  disadvantages  of  the  plan,  and  why  you  consider  it  better 
or  not  so  good  as  the  plan  of  making  the  closing  entries  directly  on  the  face  of  the  ledger. 

Closing  all  accounts  directly  in  the  ledger  is  one  extreme;  closing  all  through  journal 
entries  is  another.  Many  bookkeepers  take  a  half-way  position  in  the  matter,  closing 
through  journal  entries  the  loss  or  gain  accounts  only,  and  using  red  ink  for  closing 
balance  accounts  (including  personal  accounts)  and  for  entering  inventories  in  loss  or  gain 
accounts  before  closing. 

At  the  discretion  of  your  teacher,  you  may  employ  either  the  journal  method  or  the 
method  to  which  you  are  accustomed,  or  the  plan  mentioned  in  the  preceding 
paragraph,  in  closing  the  ledger  for  June  and  July. 


CHAPTER  VIII 

SET  FOUR 

You  are  employed  as  bookkeeper  for  Masters  &  Co.,  63  S.  Clark  St.,  dealer  in  boots 
and  shoes.  The  firm  does  a  jobbing  business — that  is,  it  both  buys  and  sells  at  wholesale. 
It  sells  for  cash  and  on  account.  Sales  for  cash  or  on  a  note  to  customers  who  have  accounts 
are  carried  through  the  ledger. 

The  books  kept  are  the  journal,  sales  book,  purchase  book,  si.\-column  cash  book, 
notes  receivable  and  notes  payable  books,  and  a  ledger. 

THE  SIX-COLUMN  CASH  BOOK 

This  book  takes  the  place  of  the  simple  form  of  cash  book  you  have  been  using.  It 
has  six  columns  and  these  might  be  put  to  various  uses,  but  in  this  set  they  are  used  as 
shown  in  the  illustration.  The  object  of  keeping  the  special  columns  is  to  classify  items 
that  are  of  a  similar  kind;  and  as  was  shown  in  connection  with  the  sales  book,  much  of 
the  labor  of  posting  is  saved. 

The  left-hand  column  on  the  debit  side  is  for  cash  sales,  as  the  heading  shows  (it  does 
not,  however,  include  cash  sales  to  persons  who  have  accounts  with  us).  Items  in  this 
column  are  not  posted  separately,  but  at  the  time  of  closing  the  cash  book  the  column 
is  footed  and  the  total  is  written  in  the  general  cash  column,  from  which  it  is  posted  to 
the  credit  side  of  the  cash  sales  account  in  the  ledger.  A  check  mark  is  placed  in  the  folio 
column  opposite  each  cash  sale  to  show  that  it  is  not  to  be  posted  separately. 

Note  that  the  June  1  balance  is  not  written  in  the  general  column.  When  the  total 
of  cash  sales  is  written  in  the  general  column,  the  general  column  then  exhibits  all  cash 
receipts  and  its  total  is  the  total  of  cash  receipts  for  June.  Each  item  in  this  column 
is  posted  to  the  credit  side  of  some  ledger  account. 

The  footing  of  the  general  column  is  written  in  the  balance  column  and  adtled  to 
the  June  1  balance. 

Items  of  expense  are  omitted  from  the  general  column  on  the  credit  side  and  entered 
in  the  special  column  provided.  A  check  mark  is  placed  in  the  folio  column  opposite 
each  of  these  to  show  that  it  is  not  to  be  separately  posted.  The  total  of  the  expense 
column  is  written  in  the  general  column  and  from  there  posted  to  the  debit  of  the  expense 
account. 

When  the  total  of  expense  has  been  entered  in  the  general  credit  column,  the  latter 
exhibits  all  the  disbursements  for  June.  The  cash  balance  is  then  ascertained  and  is 
written  in  the  general  column  as  shown. 

The  cash  discount  column  is  not  a  cash  column.  It  is  in  the  cash  book  simply  for 
convenience.     When  we  pay  a  creditor,  the  amount  of  the  payment  is  entered  in  the 

127 


128 


SET    FOUR 
ILLUSTRATION    OP    A    SIX-COLUMN    CASH    BOOK 


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general  column  on  the  credit  side.  If  we  secure  a  discount  the  discount  item  is  written 
beside  the  payment,  in  the  cash  discount  column,  which  is  conveniently  near  the  general 
column.  Both  the  payment  and  the  discount  are  posted  to  the  debit  of  the  creditor's 
account.  To  balance  these  two  items  posted  to  the  debit  side  of  the  ledger,  we  have 
(1)  The  credit  to  cash,  from  the  fact  that  the  amount  of  the  payment  is  entered  in  the 
general  column  of  the  cash  book.  (2)  The  credit  to  the  cash  discount  account — for  the 
cash  discount  column  is  footed  and  its  total  posted  to  the  credit  of  the  cash  discount 
account. 

The  cash  book  is  ruled  in  closing  as  shown  in  the  illustration.     The  balance  is  brought 
down  on  the  debit  side  in  the  general  column. 


THE    PURCHASE    BOOK 
ILLUSTRATION    OF    A    SIX-COLUMN    CASH    BOOK 


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THE  PURCHASE  BOOK 

Purchases  of  merchandise  are  entered  in  this  book.  Each  purchase  is  posted  to 
the  credit  of  some  ledger  account  (usually  a  personal  account)  and  the  total  is  posted 
to  the  debit  of  the  merchandise  account.  It  is  not  customary  to  itemize  the  goods  bought ; 
the  general  practice  is  for  the  purchaser  to  retain  the  invoices,  and  this  of  course  makes 
it  unnecessary  to  itemize  the  goods  bought. 

The  form  used  in  set  four  is  very  simple,  and  provides  for  the  recording  of  only  the 
bare  essentials  of  each  transaction.  In  practice,  much  more  elaborate  forms  are  often 
used,  with  special  columns  for  such  informational  matter  as  may  be  deemed  important. 
For  instance,  a  special  column  may  be  kept  for  the  seller's  invoice  number.     Sometimes 


130  SET    FOUR 

incoming  invoices  are  numbered  by  the  bookkeeper  as  received  and  a  special  column  is 
provided  in  which  these  numbers  can  be  recorded.  Again,  the  date  of  a  bill  is  quite  likely 
to  be  different  from  the  date  the  invoice  is  received,  and  a  separate  column  should  then 
be  kept  in  which  the  date  of  the  bill  would  be  shown,  the  discount  date  being  figured 
from  this  date.  Special  columns  may  be  provided  for  the  discount  date  (or  the  different 
discount  dates)  and  for  the  date  of  maturity,  as  in  the  notes  payable  book.  All  of  these 
special  columns  are  purely  auxiliary,  and  are  omitted  from  this  form  for  the  sake  of 
simplicity. 


THE    PURCHASE    BOOK 


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Use  the  same  notes  receivable  book  and  notes  payable  book  you  used  for  the  furniture 
business,  leaving  a  few  blank  lines  below  the  May  entries. 

Accounts  Kept.  You  will  keep  the  following  accounts  in  your  ledger,  allowing  for 
each  account  one  line  for  the  heading,  one  line  for  the  year  dates,  and  for  the  entries  the 
number  of  lines  given  in  the  following  list: 


Capital 10  lines 

Real  Estate 8  lines 

Furniture  &  Fixtures 8  lines 

Merchandise 13  lines 

Cash  Sales 4  lines 

In-Freight 12  lines 

Insurance 8  lines 

Interest  &  Discount 13  lines 

Expense 9  lines 

Cash  Discount 8  lines 

Loss  &  Gain 18  lines 

Notes  Receivable 9  lines 

Smith  &  Wellman,  1349  S.  Clark  St 11  lines 

Oscar  E.  Hewitt,  209  S.  Dearborn  Ave... .  8  lines 


Grant  Butler  &  Co.,  Peoria,  111 9  lines 

E.  W.  Phillips,  2639  S.  Halsted  St 9  lines 

Notes  Payable 8  lines 

Groves  &  Rood,  175  Fifth  Ave 10  lines 

Walker  &  Co.,  Columbus,  Ohio 10  lines 

Carpenter  Bros.,  St.  Louis,  Mo 7  lines 

C.  E.  Masters  Estate 7  lines 

C.  N.  Masters,  legatee 7  lines 

Mary  B.  Groves,  legatee 7  lines 

U.  S.  4's  1921 7  lines 

Apartments,  1419  W.  Madison  St 7  lines 

Income  from  Apartments  1419  W.  Mad- 
ison St 7  lines 


TRANSACTIONS  FOR  JUNE  131 

The  cash  discount  account  is  debited  for  cash  discounts  we  allow,  which  are  costs  to  us. 
It  is  creilited  for  cash  discounts  allowed  to  us  by  others,  which  are  returns  to  us.  The  stu- 
dent will  have  no  difficulty  with  this  account  if  he  will  imagine  that  when  such  bills  are 
settled  the  entire  amount  of  cash  is  paid  and  then  a  part  of -it  is  returned  by  the  creditor. 

The  insurance  account  exhibits  the  costs  for  insurance,  and  the  returns  on  this 
account,  if  any.     It  is  treated  just  like  the  expense  account. 

The  "U.  S.  4's,  1921"  account  is  an  asset  account  like  the  notes  receivable  account. 
It  exhibits  the  amounts  of  United  States  4%  bonds  maturing  in  1921  which  have  been 
received  and  disposed  of. 

"Apartments  1419  W.  Madison  St."  is  the  title  of  a  property  account  that  is  no 
different  in  its  nature  from  the  Real  Estate  account. 

"Income  from  Apartments  1419  W.  Madison  St."  is  the  name  of  an  account  in  which 
we  keep  a  record  of  costs  and  returns  from  that  property.     It  is  a  loss  or  gain  account. 

The  cash  sales  account  is  a  temporary  account  which  is  debited  for  the  amount  of 
cash  sales  as  entered  in  the  sales  book  at  the  end  of  the  month  or  whenever  the  cash  sales 
column  in  the  cash  book  is  footed,  and  credited  for  the  same  amount  as  posted  from  the 
cash  book.     When  both  entries  to  it  are  posted,  it  balances,  and  should  be  I'uled  off. 

One  of  the  features  of  set  four  is  a  little  "set  within  a  set."  S.  D.  Masters,  the  senior 
partner,  is  made  executor  of  the  estate  of  C.  E.  Masters,  deceased,  a  brother,  and  rather 
than  open  a  complete  new  set  of  books  for  the  estate,  he  carries  the  accounts  of  the  estate 
on  the  books  of  the  firm.  When  the  estate  is  distributed  among  the  heirs  according  to 
law,  it  will  be  seen  that  all  of  these  estate  accounts  have  disappeared  from  the  books. 

Although  there  are  several  partners,  only  one  capital  account  is  kept.  The  invest- 
ment accounts  of  the  partners  are  kept  in  a  private  ledger  to  which  they  only  have  access. 
Whenever  you  have  an  entry  which  would  ordinarily  go  into  one  of  the  investment  accounts, 
you  debit  or  credit  Capital,  at  the  same  time  handing  S.  D.  Masters  a  memorandum 
which  will  enable  him  to  make  the  proper  entry  in  the  private  ledger.  (You  need  not 
actually  prepare  these  memorandums.)  The  sum  of  the  balances  of  the  private  ledger 
should  equal  the  balance  of  the  capital  account. 

Transactions 
191— 

June  1.  Enter  in  your  ledger  and  cash  book  the  following  balances,  which  represent 
the  condition  of  the  business  of  Masters  &  Co.  on  this  date. 

26625.99  Oscar  E.  Hewitt  325.00 

Grant,  Butler  &  Co.  69 .  70 

E.  W.  Phillips  125.60 

Notes  Payable  500.00 

1.50  Groves  &  Rood  325.75 

14.75  Walker  &  Co.  410.10 

Carpenter  Bros.  259.26 

Cash  2432.39 

Explanation.  The  balance  of  the  notes  receivable  account,  $240.00,  is  for  a  30-day  note  at  6%  dated 
May  7;  it  was  received  from  S.  H.  "Watson  on  account.  Make  a  proper  memorandum  on  the  notes  receiv- 
able book.  The  balance  of  the  notes  payable  account  is  for  our  60-day  note  for  S500.00  at  6%  given  to 
Holmes  &  Ferguson  on  May  13  to  cover  their  invoice  of  that  date.  -  Make  a  proper  memorandum  in  the 
notes  payable  book.  Items  of  interest  accrued  on  the  note  receivable  and  the  note  payable  were  included 
among  the  losses  and  gains  at  the  time  of  the  last  closing  and  were  brought  down  as  inventories  on  June  1 
as  shown  by  the  foregoing  trial  balance.  Salaries  earned  but  unpaid  were  also  included  among  the  losses 
for  last  month  and  the  item  was  brought  down  on  June  1  as  an  offset  to  the  expenses  for  June  as  shown. 


Capital 
Real  Estate 

152.50.00 

Furniture  &  Fixtures 

823.60 

Merchandise 

8627.45 

Interest  &  Discount 

.96 

E.xpense 

Notes  Receivable 

240.00 

Smith  &  Wellman 

242.65 

132  SET    FOUR 

June  1.  Insured  our  stock  of  merchandise  for  $6900.00,  paying  the  premium  for 
one  year  in  advance  in  cash.  The  premium  paid  was  at  the  rate  of  $1.2.5  per  hundred. 
(Debit  Insurance.) 

June  2.     Bought  from  Groves  &  Rood,  175  Fifth  Ave.,  City,  terms  2/10  n/30, 
24  prs.  youths'  patent  leather  bluchers,  at  $1.80  $43.20 

36  prs.  boys'  kid  bluchers,  at  90<(  32.40 

24  prs.  boys' gura  overshoes,  at  $1.00  24.00  $99.60 

June  2.  Paid  Walker  &  Co.,  by  check,  the  amount  of  their  invoice  of  May  23,  $142..50, 
less  2%  discount  which  was  allowed  for  cash  in  ten  days.  Included  100  exchange  in  the 
amount  of  the  check. 

Deduct  2%  from  the  amount  of  the  invoice.  Enter  the  amount  of  cash  paid  (exclusive  of  the 
exchange)  in  the  general  column  on  the  credit  side  of  the  cash  book,  and  the  amount  of  the  discount  in 
the  cash  discount  column  beside  it.  When  you  post  these  two  items  to  Walker  &  Co.'s  account  in  the 
ledger,  use  only  one  line,  following  the  form  shown.  The  exchange  is  entered  separately  in  the  cash  book; 
the  amount  is  written  in  the  expense  column  and  a  check  mark  is  placed  in  the  folio  column. 


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June  3.     Paid  the  salaries  for  the  week  ending  today,  in  cash,  as  follows:     H.  II. 
Webster,  bookkeeper,  $17.50;  Ada  Mount,  stenographer,  $12.00. 

Two  lines  are  used  in  writing  this  entry.     Check  in  the  folio  column  on  both  lines. 

June  3.     Cash  sales  of  Mdse.  for  June  1,  2,  and  3  were  $167.50. 
Enter  this  in  the  cash  sales  column,  and  place  a  check  mark  in  the  folio  column. 
June  5.     Sokl  to  E.  W.  Phillips,  2639  S.  Halsted  St.,  on  account, 


12  prs.  men's  box  calf  bluchers,  at  $2.65 

12  prs.  men's  University  patent  bluchers,  at  $2.95 


$31.80 
35.40 


$67.20 


To  save  time  and  space,  use  the  following  abbreviations  in  making  sales  book  entries.     These  abbre- 
viations are  generally  recognized  in  the  boot  and  shoe  business: 


Blu. 
Pat. 
Lea. 
Ox. 
Butt. 


=  Bluchers 
=  Patent 
=  Leather 
-Oxfords 
=  Button 


0.  G. 

=  Oil  Grain 

Bale. 

=  Balmorals 

Kang. 

=  Kangaroo 

Vel. 

=  Velour 

Gr. 

=  Grain 

Pol. 

=  Polish 

Russ. 

=  Russet 

Wos. 

=  Women's 

Dong. 

=  Dongola 

Cong. 

=  Congress 

June  6.     Received  cash  from  Smith  &  Wellman  to  cover  our  invoice  of  May  7,  $122.50. 
June  6.     Received  cash  from  S.  H.  Watson  for  his  note  of  May  7,  $240.00,  and  interest 
for  30  days  at  6%,  $1.20. 

June  6.     Paid  cash  for  500  20  stamps  for  office  use. 


TRANSACTIONS    FOR  JUNfi  133 

June  7.     Sold  to  Oscar  E.  Hewitt,  209  S.  Dearborn  Ave.,  on  account, 

15  prs.  men's  oil  grain  No-Seam  balmorals,  at  $1.50  $22.50 

12  prs.  women's  tan  vici  bluchers,  at  $2.25  27.00  $49.50 

June  7.     Received  Grant,  Butler  &  Co.'s  clieck  for  $69.70,  in  settlement  of  our  bill 
against  them  of  May  28. 

June  7.     Bought  from  Walker  &  Co.,  Columbus,  Ohio,  terms  2/10  n/30, 

30  prs.  men's  gun  metal  bluchers,  at  $2.10  $63.00 

20  prs.  vici  balmorals,  old  man's  last,  at  $1.40  28.00  $91.00 

June  7.     Paid  the  freight  charges  on  the  above  shipment  in  cash,  $1.35. 
June  7.     Paid  cash  to  Groves  &  Rood  for  their  invoice  of  May  28,  $325.75  less  2% 
cash  discount. 

June  8.     Sold  to  Grant,  Butler  &  Co.,  on  account,  terms  2/10  n/30, 

12  prs.  men's  kid  balmorals,  at  $2.50  $30.00 

18  prs.  men's  University  calf  bluchers,  at  $2.95  53 .  10 

24  prs.  men's  Para  rubbers,  "Wilhite,"  at  75(S  18.00  $101.10 

June  8.     Received  from  Oscar  E.   Hewitt  on  account  his  30-day  note  at  6%  for 
.$325.00,  dated  May  26,  the  date  of  the  sale  to  him  which  the  note  covers. 

June  8.     Bought  from  Carpenter  Bros.,  St.  Louis,  Mo.,  terms  3/10  1/30  n/60, 

24  prs.  women's  Maxine  button  shoes,  at  $2.10  $50.40 

30  prs.  ladies'  Dongola  C.  S.  balmorals,  at  $1.00  30.00 

24  prs.  ladies' Dongola  patent  tip  bluchers,  at  $1.10  26.40  $106.80 


June  8.     Paid  the  freight  charges  on  the  above  shipment  in  cash,  $1.60. 

June  8.  Paid  cash  to  Walker  &  Co.,  for  their  bill  of  May  29,  $267.60,  less  2%  cash 
discount. 

June  9.  Received  from  E.  W.  Phillips  $125.60  in  cash  to  cover  the  balance  of  his 
account  as  of  June  1,  and  his  15-day  note  at  6%  dated  June  5  for  $67.20  to  cover  the  sale 
to  him  on  that  date. 

June  9.  Gave  Carpenter  Bros,  our  30-day  note  at  6%  for  $259.26,  to  cover  their 
bill  of  May  30.     We  dated  the  note  May  30. 

June  10.     Bought  from  Walker  &  Co.,  terms  2/10  n/30, 

30  prs.  men's  kangaroo  grain  "Ripless,"  at  $1.15  $34.50 

24  prs.  men's  American  rubbers  "Quaker,"  at  .60  14.40  $48.90 

June  10.  Paid  the  freight  charges  on  the  above  shipment  in  cash,  $1.00. 

June  10.  Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 

June  10.  Cash  sales  for  the  week,  $325.67. 

June  12.  Paid  cash  to  Groves  &  Rood  for  their  invoice  of  June  2,  $99.60  less  2% 
discount. 

June  12.  Sold  to  E.  W.  Phillips,  on  his  60-day  note  at  6%, 

24  prs.  men's  oil  grain  No-Seam  balmorals,  at  $1.50         $36.00 
20  prs.  boys'  kid  bluchers,  at  $1.35  27.00 

36  prs.  women's  tan  vici  bluchers,  at  $2.25  81  00  $144.00 


134  SET    FOUR 

June  13.     Bought  from  Carpenter  Bros.,  terms  2/10  n/30, 

12  prs.  women's  Maxine  button  shoes,  at  $2.10  $25.20 

24  prs.  infants'  velour  polish,  patent  tip,  at  $.80  19.20 

30  prs.  boys' kid  bluchers,  at  $.90  27.00  $71.40 

June  14.     Sold  to  Smith  &  Wellman,  1349  S.  Clark  St.,  on  account, 
12  prs.  men's  American  rubbers,  "Quaker,"  at  .90  $10.80 

15  prs.  men's  oil  grain  "No-Seam"  balmorals,  at  $1.50      22.50  $.33.30 

Post  and  take  a  trial  balance.  In  posting,  use  the  initial  P  to  indicate  the  purchase 
book.  Do  not  post  the  totals  of  the  sales  book,  purchase  book  or  cash  book,  but  these 
totals  must  be  included  in  the  trial  balance  with  the  following  respective  explanations: 
"Sales  on  account  to  date,  not  posted;"  "Purchases  on  account  to  date,  not  posted;" 
"Cash  sales  to  date,  not  posted;"  "Expenses  to  date,  not  posted;"  "Cash  discount 
credit  total  to  date,  not  posted."  The  cash  book  is  not  to  be  closed  at  this  time,  but  the 
balance  must  be  ascertained  and  included  in  the  trial  balance.  It  is  ascertained  as  follows: 
Add  together  the  cash  balance  June  1,  general  receipts,  and  receipts  from  petty  cash 
sales;  from  the  total  secured,  subtract  the  sum  of  the  payments  shown  in  the  general  and 
expense  columns. 

June  16.     Bought  from  Groves  &  Rood,  terms  2/10  n/30, 

24  prs.  youths'  patent  leather  bluchers,  at  $1.80  $43.20 

12  prs.  boys'  Para  rubbers,  at  40^  4 .  80 

36  prs.  boys' box  calf  bluchers,  "Bulldog,"  at  $1.20  43.20  $91.20 

June  17.  Paid  Walker  &  Go's,  invoice  of  June  7,  $91.00  less  2%,  by  check,  including 
10^  exchange  in  the  check. 

June  17.  Paid  Carpenter  Bros.,  invoice  of  June  8,  $106.80  less  3%,  by  check,  includ- 
ing 10^  exchange  in  the  check. 

June  17.     Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 

June  17.     Cash  sales  for  the  week  were  $427.50. 

June  19.  Received  Grant,  Butler  &  Co.'s  check  for  $99.08,  to  cover  our  bill  of  June  8 
less  discount.  The  bill  was  due  on  June  18,  but  as  that  day  was  Sunday  the  discount 
was  allowed  on  the  19th. 

Make  two  entries,  one  in  the  cash  book  and  one  in  the  journal.  If  there  were  many  transactions 
of  this  kind,  it  would  be  advantageous  to  have  a  special  column  for  cash  discounts  on  the  debit  side  of 
the  cash  book. 

June  19.     Sold  to  Smith  &  Wellman  on  account, 

12  prs.  youths'  kangaroo  grain  high  cut  shoes,  at  $1.85    $22.20 

15  prs.  men's  Carey  bluchers,  at  .$3.10  46.50  .$68.70 


June  20.  ^--Received  cash  from  E.  W.  Phillips  in  payment  of  his  note  dated  June  5, 
$67.20,  atKtinterest  for  15  days  at  6%,  $0.17. 

\JHfie  20,     Paid  Walker  &  Co.'s  bill  of  June  10,  $48.90,  less  2%,  in  cash. 

June  21.     Smith  &  Wellman  returned  to  us  for  credit  3  prs.  men's  Carey  bluchers, 
which  they  had  bought  from  us  at  $3.10.     We  gave  them  credit  for  the  goods  returned. 

A  credit  memorandum  is  usually  sent  to  a  customer  who  returns  goods  for  credit.    Debit  the  Mdse. 
account  and  credit  the  account  of  Smith  &  Wellman. 


TRANSACTIONS    FOR    JUNE  135 

Often  when  many  transactions  of  this  kind  occur  a  separate  account  is  kept  for  them  under  the  title 
Goods  Returned  to  Us  or  some  other  title  meaning  the  same.  Similarly  a  special  account  might  be  kept 
for  goods  returned  by  us.  In  some  cases,  where  there  are  a  vast  number  of  returns,  separate  books  are 
kept  for  goods  returned  to  us  and  goods  returned  by  us.  The  plan  of  posting  from  these  books  is  similar 
to  that  employed  in  posting  from  the  sales  book  and  the  purchase  book. 

June  22.     Sold  to  Grant,  Butler  &  Co.,  on  account, 

12  prs.  men's  kangaroo  grain  "Ripless,"  at  $1.75  $21.00 

12  prs.  misses'  kid  bluchers,  patent  tip,  at  $1.42i  17.10  $38.10 

June  23.  Smith  &  Wellman  claimed  that  4  pairs  of  the  youths'  kangaroo  grain  high 
cut  shoes  sold  them  on  June  19  were  defective,  and  we  allowed  them  a  rebate  of  $0.50 
per  pair. 

Debit  the  Mdse.  account  and  credit  Smith  &  Wellman 's  account.  A  credit  memo,  is  usually  sent 
for  such  items.  Separate  accounts  may  be  kept  for  claims  allowed  to  us  and  for  claims  allowed  by  us, 
when  there  are  many  such  items.     Sometimes  separate  books  are  kept,  as  in  the  case  of  returned  goods. 

June  24.     Sold  to  Oscar  E.  Hewitt,  on  account, 

12  prs.  men's  box  calf  bluchers,  at  $2.65  $31.80 

12  prs.  men's  University  patent  bluchers,  at  $2.95  35.40 

12  prs.  youths' patent  leather  bluchers,  at  $2.40  28.80  $96.00 


Note. — Sometimes,  instead  of  entering  such  items  as  the  above  in  a  sales  book,  a  duplicate  of  the 
customer's  order  or  of  our  invoice  is  kept  and  filed,  posting  to  the  customer's  account  being  made  direct 
from  the  duplicate  order  or  invoice.  This  plan  is  followed  in  Wholesale  Accounting,  which  is  the  second 
part  in  the  series  of  accounting  te.xts  of  which  this  is  the  first. 

June  24.     Paid  the  salaries  for  the  week  in  cash  as  on  June  3. 

June  24.     Cash  sales  for  the  week,  .1410.54. 

June  25.     Bought  from  Groves  &  Rood,  terms  2/10  n/30, 

30  prs.  boys'  kid  bluchers,  at  900  $27.00 

24  prs.  youths'  patent  leather  bluchers,  at  $1.80  43.20 

18  prs.  boys' gum  overshoes,  at  $1.00  18.00  $88.20 

Note. — Sometimes,  instead  of  entering  such  items  as  the  above  in  a  purchase  book,  the  invoice 
itself  is  filed  and  the  posting  done  direct  from  it;  or  the  invoices  are  pasted  in  a  book  which  is  provided 
with  a  column  at  the  side  in  which  the  totals  only  are  enteied,  posting  being  done  from  this  column.  The 
latter  plan  is  illustrated  and  taught  in  Wholesale  Accounting. 

June  25.  Received  cash  from  Oscar  E.  Hewitt  for  his  note  dated  May  26,  $325.00 
and  interest  for  30  days  at  6%. 

June  26.     Sold  to  Smith  &  Wellman,  on  account, 

12  prs.  men's  King  George  oxfords,  at  $3.20  $38 .  40 

12  prs.  men's  congress  calf,  at  $2.50  30.00 

12  prs.  women's  Maxine  button,  at  3.00  36.00  $104.40 

June  27.  Discounted  at  the  bank  E.  W.  Phillips'  60-day  note  of  June  12  in  our 
favor.  The  note  was  for  $144.00  and  bore  interest  at  6%.  Rate  of  discount,  5%.  Net 
cash  received,  $144.53. 

Verify  the  above  computation.  Make  only  one  entry  for  the  interest.  It  is  not  at  all  unusual, 
however,  for  two  entries  to  be  made,  one  for  the  full  amount  of  the  interest  for  60  days  and  the  other  for 
the  discount. 


136  SET    FOUR  / 

June  27.     Received  Oscar  E.  Hewitt's  clieck  for  $49.50  for  our  invoice  of  June  7. 

June  28.     Sold  to  Grant,  Butler  &  Co.,  on  account, 

12  prs.  men's  Boston  bluchers,  at  $1.50  $18.00 

20  prs.  ladies'  Dongola  C.  S.  balraorals,  at  $1.60  32.00 

12  prs.  men's  Para  rubbers  "Wilhite"  at  75^  9.00  $59.00 

June  29.  Paid  in  cash  our  note  dated  May  .30  in  favor  of  Carpenter  Bros.,  and 
intere.st.     Face  of  note,  $259.26;  interest,  30  days  at  6%,  $1.30. 

June  30.  R.  P.  Smiddy  &  Co.  presented  a  bill  for  drayage  for  the  month  which  we 
paid  in  c^sh,  $22.45.  Of  this  amount,  $3.50  was  for  delivering  freight  from  the  depot, 
and  is/chargeable  to  the  In-Freight  account.  Tlie  balance  was  for  deliveries  to  our  cus- 
tomers, and  is  chargeable  to  the  expense  account.  Make  two  entries  in  the  cash  book. 
V   June  30.     Cash  sales  for  the  week  up  to  and  including  today,  $367.20. 

Inventories  June  30:  Real  estate,  $15190.00;  furniture  and  fixtures,  $817.50;  Mdse., 
S7375.62;  insurance,  11  months'  premium  unexpired,  $79.06;  interest  accrued  on  our  note 
for  $500.00  payable  to  Holmes  &  Fergu.son,  48  days  at  6%,  $4.00;  salaries  earned  and 
unpaid  $24.58. 

Post,  take  a  trial  balance,  prepare  statements,  and  close  the  ledger,  proceeding  as 
follows : 

(1)  Enter  in  the  sales  book,  as  its  last  item,  the  amount  of  cash  sales  for  the  month, 
as  indicated  by  the  footing  of  the  cash  sales  column  in  the  cash  book.  Post  all  unposted 
sales  book  items,  the  last  item  being  posted  to  the  cash  sales  account.  Post  the  total 
of  the  sales  book. 

(2)  Post  all  unposted  purchase  book  items  and  post  the  total  of  the  purchase  book. 

(3)  Post  all  unposted  journal  items. 

(4)  Post  all  unposted  cash  book  items,  enter  the  footings  of  the  special  cash  columns 
in  the  general  columns  and  post  them,  and  close  the  cash  book  with  a  balance,  all  as 
illustrated  and  described  in  detail  on  pages  128  and  129.  Remember  that  the  cash  discount 
column  is  not  a  cash  column. 

(5)  Take  a  trial  balance,  prepare  statements,  and  close  the  ledger.  The  cash  sales 
account  will  not  appear  in  the  trial  balance,  because  the  debit  item  posted  to  this  account 
from  the  sales  book  and  the  credit  item  posted  to  it  from  the  cash  book  just  balance  each 
other. 

T  ransactions— Continued 

191— 

July  1.     Received  cash  from  Smith  &  Wellnian  to  cover  our  invoice  of  May  30,  $120-15. 

July  1.     Sold  to  Oscar  E.  Hewitt,  on  account, 

24  prs.  women's  tan  vioi  bluchers,  at  $2.25  $54.00 

15  prs.  men's  gun  metal  bluchers,  at  $2.85  42 .  75  $96 .  75 

July  1.     Cash  sales  for  the  day,  $72.46. 

July  1.     Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 

July  3.     Sold  for  cash  to  E.  W.  Phillips, 

12  prs.  men's  russet  grain  bluchers,  at  $2.50  $30.00 

20  prs.  men's  Congress  calf,  at  $1.75  35.00 

15  prs.  boys' Para  rubbers,  at  $.65  9.75  $74.75 

The  above  transaction  is  to  be  carried  through  the  ledger. 


TRANSACTIONS    FOR    JULY  137 

July  3.  Accepted  Carpenter  Bros,  draft  on  us  at  10  days  sight  for  $71.40,  the  amount 
of  their  invoice  maturing  July  13. 

July  3.     Bought  from  Groves  &  Rood,  terms  1/30  n/60, 

12  prs.  men's  high  cut  work  shoes,  at  $4.20  $50 .  40 

20  prs.  youths'  kangaroo  grain  high  cut,  at  $1.25  25.00 

12  prs.  men's  kid  bluchers,  at  $2.20  26 .  40  $101 .  80 

July  5.     Paid  Groves  &  Rood  in  cash  for  their  invoice  of  June  2.5,  .SSS.20  le.ss  2%. 

July  6.  Bought  from  Walker  &  Co.,  Columbus,  Ohio,  terms  3/10  1/30  n/GO,  invoice 
dated  July  3, 

24  prs.  men's  oil  grain  No-Seam  balmorals,  at  $1.10         $26.40 

24  prs.  men's  gun  metal  bluchers,  at  $2.10  50.40  $76.80 

A^'rite  the  date  of  the  invoice  just  to  the  left  of  the  terms  in  the  purchase  book.  The  dates  for  dis- 
counting and  the  date  for  maturity  are  determined  from  this  date. 

July  6.     Paid  freight  charges  on  the  above  in  cash,  $1.15. 

July  7.     Paid  cash  for  750  2^  stamps. 

July  7.     Sold  to  E.  W.  Phillips  on  his  30-day  note  at  6%, 
24  prs.  men's  kid  balmorals,  at  $2.50  $60.00 

24  prs.  men's  University  calf  bluchers,  at  $2.95  70.80 

12  prs.  men's  Para  rubbers,  "Wilhite,"  at  $.75  9.00  $139.80 

July  8.  Drew  on  Grant,  Butler  <&  Co.  at  ten  days  sight  for  the  balance  due  on  their 
account  July  1,  $97.10.     (No  entry.) 

July  8.  Cash  .sales  for  the  week  ending  today,  $410.25. 
July  8.  Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 
July  10.  S.  D.  Masters,  senior  member  of  the  firm,  was  appointed  executor  of  the 
estate  of  C.  E.  Masters,  deceased,  a  brother.  The  estate  consisted  of  an  apartment  build- 
ing at  1419  W.  Madison  St.  and  75  U.  S.  4%  bonds  of  1921,  par  value  $100.00  each.  The 
building  and  the  bonds  were  to  be  sold  and  the  returns,  including  income  up  to  the  time 
of  the  sale,  were  to  be  divided  equally  between  C.  N.  Masters,  a  son,  and  Mary  B.  Groves, 
a  married  daughter,  of  the  deceased. 

The  accounts  of  the  estate  are  to  be  kept  on  the  books  of  Masters  &  Co.  Debit  the  Apartments  1419 
W.  Madison  St.  account  and  the  U.  S.  4's  1921  account,  and  credit  the  C.  E.  Masters  Estate  account. 
Owing  to  uncertainty  as  to  the  value  of  the  apartments,  use  a  nominal  valuation  of  $1.00  for  this  item. 
The  U.  S.  4%  bonds  of  1921,  including  accrued  interest  to  date,  are  worth  $121.60  each,  and  should  be 
entered  at  this  valuation. 

\X  July  10.     Bought  from  Groves  &  Rood,  accepting  their  draft  on  us  at  60  days,  without 
interest,  for  the  amount  of  the  invoice, 

18  prs.  youthsi  patent  leather  bluchers,  at  $1.80  $32.40 

30  prs.  boys'  gum  overshoes,  at  $1.00  30.00 

24  prs.  boys'  kid  bluchers,  at  $0.92  22 .  08 

36  prs.  youths'  kangaroo  grain  high  cut  shoes,  at  $1.25      45.00  $129.48 

July  11.  Received  Grant,  Butler  &  Co.'s  acceptance  dated  July  10,  due  July  20, 
for  $97.10. 

July  12.  H.  D.  Berlin  and  L.  W.  Langley,  both  renters  of  apartments  at  1419  W. 
MadLson  St.,  have  paid  their  rent  for  June  in  cash,  $50.00  each. 

Debit  the  cash  account;  credit  the  Income  from  Apartments  1419  W.  Madison  St.  account.  Write 
the  entry  in  the  balance  column  of  the  cash  book,  in  order  to  separate  it  from  the  receipts  of  the  business. 


138  SET    FOUR 

July  12.  Paid  cash  for  our  note  in  favor  of  Holmes  &  Ferguson  and  interest  for 
60  days  at  6%.     The  note  was  for  $500.00  and  was  dated  May  13. 

July  13.     Bought  from  Carpenter  Bros.,  terms  3/10  2/30  1/60  n/90, 

24  prs.  women's  American  rubbers  ''Good-sense,"  at  $.45  $10.80 
24  prs.  women's  rubbers,  "No-Heel,"  at  $.40  9.60 

24  prs.  men's  American  rubbers  "Quaker,"  at  $.60  14.40  $34.80 

July  13.     Paid    in   cash    Walker   &    Co.'s    invoice    dated   July    3,    $76.80    less  3%. 
Included  10^  exchange  in  the  amount  of  the  check. 
July  13.     Sold  to  E.  W.  Phillips,  on  account, 

12  prs.  men's  rubbers,  "Stick-on,"  at  $.85  $10.20 

24  prs.  boys'  gum  overshoes,  at  $1.40  33.60 

12  prs.  men's  kangaroo  grain  "Ripless,"  at  $1.75  21.00  $64.80 

July  13.  Redeemed  our  acceptance  in  favor  of  Carpenter  Bros.,  maturing  today, 
by  a  cash  payment. 

July  14.     Received  cash  from  Smith  &  Wellnian  to  cover  our  invoice  of  June  14, $33. 30. 

July  1.5.     Cash  sales  for  the  week  ending  today,  $427.96. 

July  15.     Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 

July  15.  Repaired  the  plumbing  in  the  apartment  at  1419  W.  Madison  St.  occupied 
by  H.  D.  Berlin,  paying  the  plumber's  bill  in  cash,  $22.50. 

Debit  the  Income  from  Property  1419  IF.  Madison  St.  account. 

Post  and  take  a  trial  balance,  following  the  instructions  on  June  15. 

July  17.  Groves  &  Rood  drew  on  us  through  the  Harris  Trust  &  Savings  Bank  for 
.$91.20,  the  amount  of  their  invoice  of  June  16  without  discount.  Paid  the  draft  in  cash 
plus  20^i  collection  fee.     (Two  entries  in  the  cash  book.) 

July  18.     Sold  to  Oscar  E.  Hewitt,  for  cash, 

18  prs.  boys'  box  calf  bluchers,  "Bulldog,"  at  $1.75  $31.50 

12  prs.  misses' kid  bluchers,  patent  tip,  at  $1.45  17.40  $48.90 

July  19.  Received  cash  from  Smith  &  Wellman  to  cover  the  balance  due  on  our 
invoice  of  June  19.  The  amount  of  the  invoice  was  $68.70,  but  there  was  a  return  made 
on  it  of  $9.30  on  June  21,  and  we  allowed  them  a  claim  of  $2.00  on  June  23. 

July  19.     Bought  from  Groves  &  Rood,  terms  2/10  n/30, 

24  prs.  infants'  velour  polish,  patent  tips,  at  $.80  $19.20 

24  prs.  mis.ses' Popular  vici  kid  bluchers,  at  $1.00  24.00  $43.20 

July  20.  Discounted  at  6%  our  acceptance  in  favor  of  Groves  &  Rood  for  $129.48 
due  Sept.  8,  paying  them  in  cash  the  amount  due. 

July  20.  Bought  from  Walker  &  Co.,  Columbus,  Ohio,  on  our  30-day  note  at  6%, 
their  invoice  dated  July  16,  our  note  having  the  same  date  as  the  invoice, 

48  prs.  men's  ffing  George  oxfords,  at  $2.60  $124.80 

60  prs.  women's  Maxine  button,  at  $2.10  126.00  $250.80 

July  20.     Paid  the  freight  charges  on  the  above  in  cash,  $2.85. 
July  20.     Advanced  to  C.  N.  Masters  $500.00  in  cash  against  his  share  of  the  C.  E. 
Masters  estate. 


TRANSACTIONS  FOR    JULY  139 

July  20.  Received  cash  from  Grant,  Butler  &  Co.  for  their  acceptance  due  today, 
$97.10. 

July  21.     Sold  Grant,  Butler  &  Co.,  on  account, 

12  prs.  King  George  oxfords  at  $3.20,  $38.40 

12  prs.  womea's  Maxine  button  shoes,  at  $3.00  36.00  $74.40 

July  21.     Bought  from  Carpenter  Bros.,  terms  2/10  n/30, 
24  prs.  men's  Carey  bluchers,  at  $2.25  $54.00 

24  prs.  men's  Boston  bluchers,  at  $1.10  26.40  $80.40 

July  22.     Cash  sales  for  the  week  ending  today,  $396.27. 

July  22.     Paid  the  salaries  for  the  week  in  cash  as  on  June  3. 

July  24.  Received  cash  from  Oscar  E.  Hewitt  in  settlement  of  our  invoice  of  June 
24,  $96.00. 

July  25.  Sold  for  cash,  at  1121.83  each,  the  75  U.  S.  4%  bonds  of  1921  held  in  trust 
for  the  C.  E.  Masters  estate. 

July  26.  Bought  from  Walker  &  Co.,  Columbus,  Ohio,  terms  2/10  n/30,  invoice 
dated  July  24, 

30  prs.  Dongola  C.  S.  balmorals,  at  $1.00,  $30.00 

24  prs.  ladies' Dongola  patent  tip  bluchers,  at  $1.10  26.40  $56.40 

July  26.     Paid  the  freight  charges  on  the  above  shipment  in  cash,  -$1.85. 
I\      July  27.     Sold  for  .112,675.00  in  cash  the  apartment  building  at  1419  W.  Madison  St., 
neld  in  trust  for  the  C.  E.  Masters  estate.     Paid  2%  commission  to  B.  R.  Upham,  the 
/real  estate  agent  who  made  the  sale. 

/  Credit  the  account  of  Apartments  1419  W.  Madisoti  St.  for  the  full  selling  price  and  debit  the  same 

account  for  the  amount  of  the  commission,  TJoth  items  being  carried  through  the  cash  buok. 

July  27.     Sold  to  Oscar  E.  Hewitt,  on  account, 

12  prs.  men's  Carey  bluchers,  at  $3.10  $37.20 

15  prs.  men's  Boston  bluchers,  at  $1.50  22.50  $59.70 

July  28.  All  the  property  of  the  C.  E.  Masters  estate  having  been  disposed  of,  S.  D. 
Masters  was  allowed  a  commission  of  1%  of  the  gross  cash  returns,  which  returns  amounted 
to  $21,658.75.  Mr.  Masters  was  entitled  to  this  commission  personally,  but  instead  of 
withdrawing  it  in  cash  he  allowed  it  to  remain  in  the  business  as  an  addition  to  his 
investment. 

Debit  the  account  of  the  C.  E.  Masters  estate.     Credit  thB"  capital  account. 

July  28.  Paid  to  C.  N.  Masters  and  Mary  B.  Groves,  heirs  of  C.  E.  Masters,  the 
amounts  respectively  due  them. 

Post  all  entries  up  to  date.  Close  the  Apartments  1419  W.  Madison  St.  account,  the  Income  from 
Apartments  1419  W.  Madison  St.  account,  and  the  U.  S.  4's,  1921  account  into  the  C.  E.  Masters  Estate 
account.  The  balance  of  the  last  named  account  is  to  be  equally  divided  between  the  two  heirs.  This 
is  done  by  two  red  ink  closing  entries. 

Now  pay  to  the  heirs  in  cash  the  amounts  shown  by  their  accounts  to  be  due  them.  When  these 
two  payments  are  posted,  these  two  accounts,  as  well  as  all  other  accounts  in  which  the  affairs  of  the  estate 
are  recorded,  will  balance,  and  should  be  ruled  to  close. 

July  28.     Smith  &  Wellman  having  failed  with  liabilities  amounting  to  $14,500.00 

and  assets  amounting  to  $5800.00,  we  received  a  check  for  $ from  the  receiver, 

which  we  accepted  in  full  of  the  account. 


140 


SET    FOUR 


To  determine  the  amount  due  from  Smith  &  Wellman,  you^will  have  to  post  all  items  affecting  that 
aceount.  -^nce  you  are  receiving  only  a  part  in  satisfaction  of  the  entire  claim,  you  will  make  an  addi- 
tional entry  in  the  journal  debiting  the  loss  and  gain  account  and  crediting  Smith  &  Wellman  for  the 
amount  necessary  to  balance  Smith  &  Wellman's  account  after  it  has  been  credited  for  the  cash  received. 
The  journal  entry  should  be  followed  by  a  detailed  explanation  of  the  entire  transaction. 

July  29.     Paid  cash  to  Groves  &  Rood  to  cover  their  invoice  of  July  19,  $43.20  less  2%. 

July  29.     Cash  sales  for  the  week  ending  totlay,  $456.29. 

July  29.     Paid  the  salaries  for  the  week  ending  today  in  cash  as  on  June  3. 

July  31.     Paid  Carpenter  Bros,  in  cash  for  their  invoice  of  July  21,  $80.40  less  2%. 

July  31.  Paid  in  cash  R.  P.  Smiddy  &  Co.'s  bill  for  drayage,  $19.65,  of  which  amount 
$2.90  was  for  delivering  freight  to  us,  the  rest  being  for  deliveries  to  our  customers. 

July  31.     Cash  sales  for  the  day,  $69.27. 

Inventories  July  31.  Real  Estate,  $15,135.00;  furniture  &  fixtures,  $811.75;  mer- 
chandise, $6757.42;  insurance,  10  months'  premium  unexpired,  $71.87;  interest  accrued 
on  E.  W.  Phillips'  note  in  our  favor,  $139.80,  for  24  days  at  6%,  $.56;  interest  accrued 
on  our  note  in  favor  of  Walker  &  Co.,  $250.80,  15  days  at  6%,  $.63;  salaries  due  and  unpaid, 
$4.92. 

Note — The  receipts  for  the  C.  E.  Masters  estate  were  kept  separate  from  the  business  receipt^  by 
being  placed  in  the  balance  column,  so  that  the  general  column  on  the  debit  side  of  the  cash  book  shoH's 
the  total  of  business  receipts.  The  payments  for  the  estate  were  entered  in  the  general  column  on  the 
credit  side,  however,  so  that  it  would  be  necessary  to  make  allowance  for  these  items  in  compiling  any 
report  of  cash  disbursements  for  the  business. 

THE  MERCHANDISE  ACCOUNT  SUBDIVIDED 

The  custom  of  subdividing  the  merchandise  account  is  becoming  more  and  more 
general.  The  extent  to  which  it  is  practiced  varies  according  to  the  extent  and  needs 
of  the  business  and  the  wishes  of  the  proprietor. 

Let  us  first  assume  a  very  simple  case.  Mr.  Smith,  instead  of  keeping  one  merchandse 
account,  keeps  three,  headed  respectively.  Purchases,  Sales  and  Mdse-General,  the  pur- 
poses of  each  being  indicated  by  its  title.  On  June  30,  191 — ,  these  accounts  appeared 
as  follows: 

PURCHASES 

191— 


June 


30 


Total  purchases 


26 

1250 

SALES 


Total  sales 


MERCHANDISE  GENERAL 


June        1      Inventory 


THE    MERCHANDISE    ACCOUNT    SUBDIVIDED 


141 


The  inventory  of  merchandise  on  June  30  is  $11,560.00.  In  closing  his  accounts, 
Mr.  Smith  first  closes  the  purchases  and  sales  accounts  into  the  general  merchandise 
account.  Then  he  enters  the  June  30  inventory  in  the  general  merchandise  account, 
after  which  he  closes  the  latter  into  the  loss  and  gain  account,  which  in  its  turn  is  closed 
into  the  proprietor's  account,  all  as  shown  by  the  following  diagram: 


Diagram  Showing  Process  of  Closing 


Mdse. -General 


Loss  &  Gain 


Problem  1.  Open  on  a  loose  sheet  of  ledger  paper  the  five  accounts  shown  above.  Write  in  them 
the  following  facts:  Inventory  July  1,  $15690.50;  cash  purchases  during  July,  $967.20;  purchases  on 
account  during  July,  $2367.70;  cash  sales  during  July,  $1560.45;  sales  on  account  during  July,  $2769.38. 
In  the  loss  and  gain  account  the  following  losses  for  July  are  shown:  Loss  on  real  estate,  $250.00;  loss 
on  furniture  and  fixtures,  $78.50;  loss  on  interest,  $21.63;  net  expenses,  $327.84.  The  balance  of  the 
proprietor's  account  July  1  was  $17680.00.  The  inventory  on  July  31  was  $15683.94.  Close  the  accounts 
according  to  the  diagram  above. 

Let  us  now  assume  a  more  e.xtended  subdivision  of  Mdse.  Separate  accounts  are 
kept  for  Good's  Returned  by  Us  and  Goods  Returned  to  Us.  The  condition  of  these  accounts 
and  their  relation  to  each  other  and  to  the  other  accounts  of  the  business  are  shown  in 
the  analysis  and  diagram  which  follow. 


Analysis  of  the  Mdse.  Account 


Inventory,  Aug.  1,  191- 
Purchases,  August, 
Goods  Ret'd  by  us 
Net  purchases 

Inventory  Aug.  31 
Cost  of  goods  sold 


— , 

$13,426.75 

Sales,  August 

$4,560.76 

$2500.00 

Goods  Ret'd  to  us 

672.81 

426.50 

Net  sales 

$3887.95 

2,073 .  50 

Cost  of  goods  sold 

2749.50 

$15,500.25 

Gain  (41 1%  of  C.  G. 

s.) 

$1138.45 

12,750.75 

$  2,749.50 


Analysis  of  Losses  and  Gains 


Advertising,  August  $  24.50 

Salaries  &  Wages,  Aug.  137 .  75 
Unclassified  Expense,  Aug.  99 .  60 
Total  expenses 

Paid  for  Int.  $42 .  60 

Rec'd  for  Int.  14.52 
Loss  on  real  estate 
Total  losses  for  August 


$261.85 


Gain  on  Mdse  as  per  analysis 
of  merchandise  account 


$1138.45 


Total  losses  for  August  as  per  contra*     439 .  93 


Net  gain  for  August,  191—,  (3%  on  capital  of  $23284.00)     $698.52 


*Conlra  means  "opposite."     In  this  case  it  means  the  other  side  of  the  analysis  sheet. 


142 


THE    MERCHANDISE    ACCOUNT    SUBDIVIDED 


Diagram  Showing  Process  of  Ctosma 


Goods  Ret'd  by  Us 


Mdse  -General 


Goods  Rel'd  to  Us 


Advertising 


Sal'ys  &  Wages 


Unclassified 
Expense 


Gen'l  Expense 


Problem  2.  Open  the  accounts  shown  in  the  diagram  above.  Write  in  them  the  following  facts. 
Prepare  an  Analysis  of  the  Mdse.  Account  and  an  Analysis  of  Losses  and  Gains.  Close  the  ledger  as 
indicated  by  the  diagram. 

Inventory  Sept.  1,  191 — ,  $17642.80;  cash  purchases  during  Sept.,  $1026.70;  purchases  on  account 
during  Sept.,  $2579.86;  purchases  on  note  as  per  journal  during  Sept.,  $1500.00;  goods  returned  by  us 
during  Sept.,  $624.50;  cash  sales  during  Sept.,  $1262.35;  sales  on  account  during  Sept.,  $3126.80;  sales 
on  note  as  per  journal  during  Sept.,  $1750.00;  goods  returned  to  us  during  Sept.,  $1337.34;  advertising 
during  Sept.,  $37.50;  salaries  and  wages  during  Sept.,  $350.00;  other  expenses  during  Sept.,  $215.60; 
received  for  interest,  $27.68;  paid  for  interest,  $75.00;  depreciation  in  value  of  real  estate,  $225.00.  Inven- 
tory of  Mdse.  Sept.  30,  191—,  $18923.65. 


Test  in  Closing    No.  Ill 

Accompanying  your  lilank  l:)ooks  i.s  Closing  Test  No.  III.  Take  a  trial  balance. 
Prepare  an  analysis  of  the  trading  account  (Mdse.)  and  an  analysis  of  losses  and  gains. 
Close  the  financial  accounts.  Then  close  the  loss  and  gain  accounts  in  the  ledger  as 
indicated  by  the  following  diagram.  Take  a  trial  balance  after  closing.  Note  that  the 
ledger  covers  a  full  year,  from  Jan.  1  to  Dec.  31  of  the  same  year. 


THE    MERCHANDISE    ACCOUNT    SUliDn'lDlOU 


143 


Diagram  Showing  Process  of  Closing 


Goods  Rel'd  by  TJs 

Real  Estate 

V 

1 

\ 

Mdse.  Purchases 

Mdse.  General 

k 

/ 

/ 

Mdse.  Sales 

Machinery  Repairs 

\ 

1 

Goods  Rel'd  to  Us 

Operating  Expense 

k 

Selling  Expense 

V 

Loss  &  Gain 

Proprietor 

> 

Interest  &  Exch. 

/ 

^ 

Cash  Discount 

\( 

Postage 

/ 

Freight  &  Expr. 

) 

Unclassified  Exp. 

/ 

Inventories  Dec.  31,  191 — ,  are  as  follows:    Mdse.,  $14189.38;  items  on  hand  charged  to  Unclassified 
Expense,  $551.61;  accrued  salaries  and  wages  (liability),  $499.94;  Real  Estate  &  Equipment,  $26651.33. 


APPENDIX 

TWO-PAGE  STATEMENTS 

The  six  pages  following  are  to  be 
studied  instead  of  Lessons  XVIII 
and  XIX,  if  the  teacher  so  instructs. 

Two  principal  facts  about  his  business  which  a  man  wishes  to  be  in  a  position  to  asecr- 
tain  are:     (1)  Its  progress;  (2)  Its  condition. 

By  "progress"  is  meant  the  gam  or  loss,  as  the  case  may  be,  during  a  certain  period, 
or  from  one  date  to  another.  By  "condition"  is  meant  the  worth,  or  net  capital  of  the 
business  at  a  given  time. 

Neither  progress  nor  condition  can  be  determined  entirely  from  the  ledger,  as  the 


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144 


TWO-PAGE    STATEMENTS 


145 


inventories  must  be  known  before  either  can  be  determined,  and  the  ledger  does  not  show 
inventories.     Most  of  the  necessary  facts,  however,  are  shown  in  the  ledger. 


The  Loss  and  Gain  Statement 

The  progress  of  the  business  is  shown  by  a  specially  prepared  statement  called  the 
Loss  and  Gain  Statement.  The  facts  from  which  it  is  compiled  are  found  in  certain 
accounts  of  the  ledger  and  the  inventories.  Before  proceeding  to  analyze  this  statement 
or  to  study  its  form,  solve  the  six  problems  on  page  57.  If  you  do  this  work  thoughtfully, 
you  will  be  led  unconsciously  into  an  understanding  of  the  principles  underlying,  the  Loss 
and  Gain  Statement,  though  its  form  will  still  be  unfamiliar  to  you. 

Study  carefully  the  illustration  given  herewith  and  the  explanation  accompanying 
it  and  prepare  a  loss  and  gain  statement  for  F.  R.  Elliott's  business  as  it  stood  on  Jan.  3L 
It  is  assumed  that  all  the  accounts  in  your  ledger  are  correct,  and  that  your  trial  balance 
of  Jan.  31  has  been  approved  by  your  teacher.  It  is  also  assumed  that  you  can  determine 
which  accounts  show  loss  or  gain  and  which  do  not. 

In  order  to  prepare  the  loss  and  gain  statement,  you  must  know  the  inventories, 
which  are  as  follows:  Mdse.,  $314.56;  furniture  and  fixtures,  $350.00.  (Accrued  interest 
on  notes  receivable,  being  very  little,  is  not  taken  into  consideration  here  as  an  inventory.) 


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146  APPENDIX 

In  form,  your  statement  will  be  like  the  model  shown  herewith.  The  amounts  will 
have  to  be  supplied  by  you  from  your  ledger  footings  and  the  inventories  given  above. 

Explanation.  To  determine  the  progress  of  a  business  it  is  necessary  to  l<now  the 
amounts  of  the  separate  losses  and  gains.  The  difference  between  the  total  of  the  losses 
and  the  total  of  the  gains  is  the  net  loss  or  net  gain  for  the  period  of  time  covered  by  the 
statement. 

The  form  shown  extends  across  two  pages  and  is  divided  into  two  sections.  The 
first  section  is  called  the  trading  section.  It  presents  the  facts  as  to  the  trading  in  mer- 
chandise that  has  been  done,  and  its  result  is  the  net  gain  (or  loss)  on  trading.  This 
result  is  carried  down  into  the  second  section.  The  second  section  exhibits  all  of  the 
gains  and  losses  of  the  business,  including  the  gain  on  trading  as  brought  down. 

Sometimes  a  third  section  is  added  in  which  are  shown  gains  and  losses  arising  from  outside  busi- 
ness or  investments,  and  a  fourth  section  which  shows  how  the  net  gain  is  disposed  of.  For  present  pur- 
poses, however,  the  simple  form  is  entirely  satisfactory. 

Trading  Section.  The  first  item  on  the  debit  page  is  the  amount  of  the  inventory 
of  merchandise  at  the  beginning  of  the  period  covered  by  the  statement  (in  this  case,  0). 
Add  to  this  the  purchases  of  merchandise  during  the  month  as  shown  by  the  ledger,  debit 
side,  and  any  other  items  of  cost  chargeable  to  merchandise  (in  this  case,  there  are  no 
other  items).  From  the  total  so  secured  subtract  the  inventory  at  the  end  of  the  period. 
The  result  is  the  cost  of  the  goods  sold.  Write  on  the  credit  page  the  amount  of  the 
sales  for  the  month  as  shown  by  the  ledger,  credit  side.  The  difference  between  the  total 
sales  and  the  cost  of  goods  sold  is  the  gain  on  trading,  which  is  entered  in  red  ink  on  the 
debit  page  and  brought  down  in  black  ink  into  the  second  section  of  the  statement,  on 
the  credit  page. 

Loss  and  Gain  Section.  The  debit  page  is  for  losses;  the  credit  page  is  for  gains.  The 
first  item  on  the  credit  page  is  the  gain  on  trading,  brought  down  from  the  trading  section. 
The  second  item  is  the  gain  on  the  interest  and  discount  account.  This  is  determined 
by  subtracting  the  debits  from  the  credits  shown  by  the  account,  the  computation  being 
written  in  the  inner  column  on  the  credit  page.     The  two  items  of  gain  are  then  added. 


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TWO-PAGE    STATEMENTS 


147 


The  first  Hem  on  the  debit  page,  second  section,  is  the  loss  on  furniture  and  fixtures. 
This  is  ascertained  by  subtracting  the  credit  footing  of  tlie  account  from  the  debit  footing 
and  from  the  result  so  secured  subtracting  the  inventory  at  the  end  of  the  month.  All 
this  is  done  in  the  inner  column  and  the  result,  the  net  loss  on  the  account,  is  entered 
in  the  principal  column.  Below  this  item  is  written  the  item  of  loss  on  expense.  All 
losses  and  gains  have  now  been  considered  and  the  difference  between  the  two  sides  as 
they  now  stand  is  the  net  gain  of  the  business  for  January. 

The  Financial  Statement 

One  of  the  two  principal  statements  that  the  booklceeper  has  to  prepare  relates  to 
the  condition  of  the  business.  This  statement  is  called  the  Financial  Statement.  The 
facts  from  which  it  is  compiled  are  found  in  certain  ledger  accounts  and  in  the  inventories. 
Before  proceeding  to  analyze  this  statement  or  to  study  its  form,  solve  the  five  problems 
on  page  55.  If  you  do  this  work  thoughtfully  you  will  be  led  unconsciously  into  an  under- 
standing of  the  principles  underlying  the  Financial  Statement,  though  its  form  will  still 
be  unfamiliar  to  you. 

Study  carefully  the  illustration  given  and  the  explanation  accompanying  it,  and 
prepare  a  financial  statement  for  F.  R.  Elliott's  business  as  it  stood  on  Jan.  31. 

In  form,  your  statement  will  be  like  the  model  shown.  The  amounts  will  have  to 
be  supplied  by  you  from  your  ledger  footings  and  the  inventories  which  have  already 
been  given. 

Explanation.  To  determine  the  condition  of  a  business,  two  things  must  be  known: 
(1)  What  things  of  value  does  the  business  own  (assets)?  (2)  What  does  the  business 
owe  (liabilities)?  The  difference  between  the  total  of  assets  and  the  total  of  liabilities 
is  the  net  capital  or  present  worth  of  the  business. 

The  assets  are  written  on  the  left-hand  page ;  the  liabilities,  on  the  right.  It  is  the  usual 
practice  to  hst  cash  first  among  the  assets.  Determine  the  balance  of  cash  by  deducting 
the  credit  footing  from  the  debit  footing,  and  write  this  item  on  the  first  line  on  the  left- 


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148  APPENDIX 

hand  page.  Next  list  the  inventories  as  given  on  page  145.  Next  examine  your  ledger 
to  determine  what  other  assets  and  habilities  the  accounts  show.  The  first  account  is 
F.  R.  Elliott's  account,  which  is  neither  an  asset  nor  a  liability,  but  shows  the  proprietor's 
investment  in  the  business.  The  next  five  accounts  are  loss  or  gain  accounts  and  have 
already  been  used  in  the  preparation  of  the  loss  and  gain  statement.  Next  is  the  cash 
account,  which  you  have  already  entered  as  an  asset.  Next  is  the  notes  receivable  account; 
enter  its  balance  as  an  asset,  as  shown.  The  next  two  accounts  are  personal  accounts 
with  debit  balances;  these  balances  are  assets,  and  should  be  entered  as  such.  Finally, 
the  notes  payable  account  and  Dale  &  Allen's  account  have  credit  balances;  these  balances 
are  liabilities,  and  should  be  entered  as  such.  The  net  capital  is  the  difference  between 
the  total  of  the  assets  and  the  total  of  the  liabilities. 

Net  capital  is  also  the  sum  of  the  invested  capital  and  the  net  gain  for  the  month, 
and  is  so  shown  on  the  statement.  The  fact  that  the  net  capital  shown  by  the  latter 
method  added  to  the  liability  side  of  the  financial  statement  makes  the  two  sides  of  the 
statement  equal,  constitutes  a  proof  of  the  accuracy  of  the  two  statements. 

Read  the  note  at  the  end  of  Lesson  XVIII. 

Take  up  the  regular  lessons  of  the  text  beginning  with  Lesson  XX,  using  the  two- 
page  forms  in  preparing  all  statements. 

How  to  Read  a  Financial  Statement 

Financial  statements  are  often  submitted  to  bankers  and  others  from  whom  it  is 
desired  to  borrow  money  or  to  buy  on  credit.  The  relation  between  borrower  and  lender 
is  not  vastly  different  from  that  existing  between  buyer  and  seller,  although  a  lender  of 
money,  because  of  the  fact  that  his  profit  is  usually  less  and  his  field  of  opportunity  wider, 
is  usually  more  cautious  than  the  seller  of  goods,  who  makes  more  profit  and  whose  cus- 
tomers are  limited  to  those  selling  the  line  of  goods  he  handles. 

The  banker  or  credit  man  should  know  how  to  read  a  statement,  and  this  requires  greater 
knowledge  and  keener  insight  than  is  required  for  the  mere  construction  of  the  statement. 

How  to  read  a  statement  is  too  broad  a  subject  to  be  treated  in  full  in  a  beginner's 
text,  but  even  the  beginner  should  be  able  to  arrive  at  certain  reasonable  conclusions  from 
the  examination  of  some  of  the  simpler  forms  of  statement. 

Examine  the  following  statements,*  both  of  which  are  of  mercantile  concerns,  and 
answer  the  questions. 

*No  attempt  is  made  at  a  complete  or  in  any  sense  adequate  treatment  of  the  subject  How  to  Read 
a  Financial  Statement,  or  of  credits.  The  sole  purpose  of  this  short  exercise  is  to  arouse  the  student's 
interest  and  to  provide  material  for  a  class  discussion  in  which  all  students  may  profit  through  interchange 
of  ideas  in  answering  questions  on  matters  which  are  in  most  instances  matters  of  individual  judgment. 

The  estimation  of  a  man's  financial  standing  and  how  much  credit  he  is  entitled  to  receive  is  not 
an  exact  science  and  never  can  be,  because  credit  is  not  determined  alone  from  the  showing  of  a  set  of 
books.  Many  things  must  be  taken  into  consideration  in  the  determination  of  credit.  None 
the  least  of  these  in  importance  are  the  integrity  and  business  ability  of  the  person  wishing 
credit.  There  are  many  large  mercantile  credit  agencies,  among  whom  are  Bradstreet  and  Dun,  which 
exist  solely  for  the  purpose  of  investigating  the  credit  standing  of  business  concerns,  and  there  are  many 
local  concerns  engaged  in  the  same  work.  Every  business  house  has  at  least  one  person  upon  whom  it 
devolves  to  say  whether  a  customer  is  entitled  to  the  credit  he  desires,  or  not.  Often  there  is  a  "credit 
man"  who  attends  to  this  kind  of  work  exclusively;  and  in  many  cases  a  large  force  of  emjiloyees  is  kept 
busy  in  the  credit  department.  The  work  of  determining  credits  offers  to  the  young  man  of  ability,  applica- 
tion, and  intelligence  a  very  attractive  and  remunerative  field. 


TWO-PAGE    STATEMENTS 


149 


F.  H.  Wilson's  Financial  Statement, 
June  1,  191— 


Geo.  H.  Rockwood's  Financial 
Statement,  June  1,  191 — 


Assets 


Cash 

Real  Estate 
Furn.  &  Fix. 
Mdse.  Invty. 
Notes  Rec. 
Interest  Rec. 
Accounts  Rec. 


Notes  Pay. 
Interest  Pay. 
Accounts  Pay. 


.00 
1.5000.00 
2000.00 
12000.00 
2500.00 
26.75 
7500.00  $49026.75 


Cash 

$750 

00 

Real  Estate 

7800 

00 

Furn.  &  Fix. 

3.500 

00 

Mdse.  Invty. 

35000 

00 

Notes  Rec. 

5000 

00 

Interest  Rec. 

567 

20 

Accounts  Rec. 

15000 

00 

Liabilit 

es 

$2200.00 
10.25 
7200.00  $  9410.25 


7617.20 


First  Nat'I  Bank  Loan  $5000.00 
Notes  Pay.  8000.00 

Interest  Pay.  750.00 

Accounts  Pay.  9500 .  00  $23250 .  00 


Net  capital 


$39616.50 


$44367.20 


Notes:  Real  estate  and  furniture  and  fixtures  are  considered  slow  assets.  Cash,  notes  receivable 
and  accrued  interest,  and  accounts  receivable  are  considered  quick  assets.  Merchandise  in  some  lines 
of  business  is  classed  with  quick  assets,  while  in  other  lines  it  is  classed  with  the  slow  assets.  For  the 
purpose  of  the  present  discussion  consider  Mdse.  a  quick  asset.  If  the  strength  of  the  statement  seems 
to  depend  too  much  upon  one  item  in  the  statement,  that  item  should  be  especially  investigated.  Notes 
payable  and  accrued  interest,  and  accounts  payable,  are  considered  urgent  liabilities.  Long  time  loans 
and  mortgages  are  not  classed  with  urgent  liabilities,  and  it  is  important  to  know  when  such  items  mature. 

QVESTIONS  ON  F.  H.  WILSON'S  STATEMENT 

1.  What  per  cent  of  the  total  assets  are  quick  assets? 

2.  What  per  cent  of  the  total  assets  are  covered  by  capital? 

3.  What  per  cent  of  the  total  assets  are  covered  by  what  is  in  reality  borrowed  capital  though  not 
so  called? 

4.  What  is  the  relation  of  quick  assets  to  urgent  liabilities? 

5.  What  would  happen  if  the  creditors  should  all  demand  payment  at  once? 

6.  Barring  loss  of  his  cash,  could  any  series  of  misfortunes  bankrupt  F.  H.  Wilson? 

7.  Assuming  an  average  rate  of  6%  on  notes,  are  the  notes  receivable  of  long  standing?  The  notes 
payable?     TATiat  inference  can  you  draw  from  the  conclusion  reached  in  answer  to  the  foregoing  questions? 

8.  State  how  much  credit  you  would  extend  to  F.  H.  Wilson  without  special  security.  How  much 
money  would  you  loan  him  if  he  would  assign  all  his  assets  to  you  as  security? 


aXJESTIONS  ON  GEO.  H.  KOCKWOOD'S  STATEMENT 
1  to  5.  Same  as  above. 

6.  Is  there  any  item  from  which  you  might  draw  an  inference  as  to  whether  the  notes  receivable 
are  of  long  standing  or  not?     The  notes  payable  and  loan? 

7.  Is  the  proportion  of  accounts  receivable  to  total  assets  greater  or  less  than  in  F.  H.  Wilson's 
business?  What  suspicion  does  this  give  rise  to?  How  can  you  go  about  it  to  either  verify  or  set  at  rest 
this  suspicion? 

8.  In  what  one  account  is  a  very  large  proportion  of  the  capital  tied  up?  How  should  this  account 
be  investigated? 

9.  How  much  would  you  sell  to  Geo.  H.  Rockwood  on  credit?  How  much  would  you  loan  him 
if  he  would  assign  all  his  assets  to  you  as  security?  WIio  would  you  probably  wish  to  consult  before  making 
him  any  loan? 

Note. — If  personal  property  and  homestead  property  are  listed  among  the  assets,  the  credit  man 
should  determine  to  what  extent  such  property  is  legally  exempt  from  execution.  For  this  reason,  credit 
rating  agencies  usually  secure  the  names  and  addresses  of  the  members  of  a  firm,  with  information  as  to 
whether  they  are  married  or  single.    In  case  of  corporations,  the  line  of  investigation  is  somewhat  different. 


SINGLE    ENTRY 


PRELIMINARY  CONSIDERATIONS 

You  have  now  mastered  the  elementary  principles  of  double  entry  bookkeeping.  This 
will  make  the  work  of  single  entry  very  easy,  as  there  is  nothing  in  single  entry  that 
you  have  not  already  learned  in  double  entry.  Before  proceeding  with  the  single  entry 
set,  however,  work  the  following  problems: 

Problem  I.  W.  S.  Ashby  keeps  a  double  entry  ledger.  On  June  30,  1910,  he 
attempted  to  take  a  trial  balance  but  found  that  one  page  of  the  ledger,  the  page  on  which 
was  his  own  account  as  proprietor,  had  been  so  defaced  that  the  balance  could  not  be 
read.  Everything  else  was  legible  and  correct.  Make  a  copy  of  the  partial  trial  balance 
shown  below  and  complete  it  by  inserting  W.  S.  Ashby 's  balance  and  the  footings: 


W.  S.  Ashby's  Partial  Trial  Balance,  June  30,  1910 


Cash       

Real  Estate  .  .  . 
Furniture  &  Fixtures 

Mdse      

Expense 

J.  S.  Dickey  .  .  . 
J.  L.  Harmon  .  . 
Cherry  Bros.  .  .  . 
W.  S.  Ashby     .    .    . 


1526 
5000 
670 
4000 
500 
500 
363 


Problem  II.  A.  C.  Minter  keeps  a  single  entry  ledger.  On  July  31,  1910,  he  found  that  the  page 
of  his  ledger  on  which  his  account  as  proprietor  had  been  kept  had  been  destroyed.  Since  a  single  entry 
ledger  contains  no  accounts  except  with  persons,  the  only  information  that  can  be  secured  from  Mr.  Minter's 
ledger  is  that  personal  accounts  receivable  and  payable  stand  as  follows:  C.  V.  Burton,  Dr.,  $49.60;  Cr., 
$10.00.  A.  D.  Taylor,  Dr.,  $175.60;  Cr.,  $62.50.  H.  P.  Towers,  Dr.,  $265.00;  Or.,  $125.50.  Libby  & 
Son,  Dr.,  $100.00;  Cr.,  $243.64.     Manning  &  Martin,  Cr.,  $215.00 

Your  problem  is  to  find  Mr.  Minter's  present  worth,  or  the  net  capital  of  the  business.  If  there  were 
no  other  assets  or  liabilities  besides  the  personal  accounts  in  the  ledger,  the  problem  would  be  simple. 
But  you  know  that  there  are  usually  other  assets,  and  you  expect  to  find  them  in  this  case.  You  there- 
fore question  Mr.  Minter  and  he  replies,  as  follows: 

You:  "How  much  cash  have  you  on  hand?"  Mr.  Minter  (indicating  the  cash  drawer):  "About 
$480.00."  Opening  the  cash  drawer,  you  find  in  it  $457.63  in  currency  and  coin,  and  R.  D.  Smith's  check 
for  $25.00  payable  to  Mr.  Minter.  In  taking  out  the  cash  to  count  it,  you  come  across  a  note  signed  by 
T.  J.  Green  in  Mr.  Minter's  favor  for  $500.00,  and  a  list  of  goods  on  hand  totaling  $5647.20.  You:  "  I  find 
here  a  note  for  $500.00  signed  by  T.  J.  Green.  Do  you  hold  any  other  notes?"  Mr.  Minter:  "No;  but 
I  owe  $1000.00  to  tlie  First  National  Bank  on  a  note.  There  are  no  other  notes  either  receivable  or  pay- 
able." You-  "Do  you  owe  any  interest  on  the  note  in  favor  of  the  bank  or  is  any  interest  due  you  on 
Mr.  Green's  note?"  Mr.  Minter:  "Some  interest  has  accrued  on  each  note  but  the  two  interest  items 
exactly  cancel  each  other."  You:  "Is  this  list  of  merchandise  on  hand  correct?"  Mr.  Minter:  "Yes, 
it  was  taken  yesterday."  You:  "Is  there  any  other  property  belonging  to  the  business?"  Mr.  Minter: 
"The  store  fixtures  are  mine,  and  I  value  them  at  $500.00.  There  is  no  other  property  belonging  to  the 
business,  and  I  do  not  owe  a  cent  except  for  the  accounts  shown  in  the  ledger  and  the  note  for  $1000.00." 

Prepare  a  financial  account,  as  you  always  have  in  previous  sets.  The  only  difference  is  that  in  this 
case  less  information  can  be  secured  from  the  ledger  than  from  a  double  entry  ledger.  The  net  capital 
shown  by  the  statement  should  appear  in  the  ledger  as  the  credit  balance  of  the  proprietor's  account. 

150 


SINGLE    ENTRY  151 

INTRODUCTION    TO    SINGLE    ENTRY 

Progressive  business  men  prefer  double  entry  because  they  find  it  desirable  to  know 
certain  facts  about  their  business  affairs  which  a  single  entry  system  will  not  reveal.  This 
"is  especially  true  when  their  business  interests  are  large  or  extensive,  in  which  case  a 
double  entry  set  of  books  is  almost  imperative. 

While  pure  single  entry  is  little  used  among  the  best  houses,  many  retail  concerns 
employ  a  combination  of  single  and  double  entry,  and  for  this  reason,  if  for  no  other, 
it  is  well  for  the  student  to  understand  what  the  single  entry  method  is.  The  work  of 
this  chapter  will  be  of  value  to  the  student  in  teaching  him  the  principles  of  single  entry, 
not  so  much  because  he  may  be  called  upon  to  keep  a  set  of  single  entry  books,  but  because 
he  is  likely  to  come  in  contact  with  accounting  in  which  some  single  entry  features  are 
incorporated  in  a  double  entry  system,  subordinate  to  the  general  double  entry  scheme. 

Single  entry  bookkeeping  is  a  method  of  keeping  unrelated  memorandums  and  records 
of  business  transactions  such  as  the  proprietor  of  a  business  may  deem  necessary  for  his 
protection  and  information. 

The  facts  of  which  memorandums  are  usually  kept  in  single  entry  are;  (1)  The  receipts 
and  payments  of  cash,  (2)  The  charges  against  and  credits  to  persons,  on  account.  Some- 
times the  inventories  of  property  owned  are  kept  as  a  matter  of  record. 

Single  entry  derives  its  name  from  the  circumstance  that  each  entry  is  a  record  of 
a  single  fact,  either  a  debit  or  a  credit,  rather  than  a  record  of  two  or  more  facts  affecting 
both  sides  of  the  ledger  equally,  as  in  double  entry. 

Comparison  Between  Single  and  Double  Entry. 

In  Single  Entry,  accounts  are  kept  only  with  persons,  cash  and  sometimes  property 
inventories,  and  since  accounts  with  persons  and  cash,  and  inventories,  must  exhibit 
either  assets  or  liabilities,  and  not  losses  or  gains,  it  is  apparent  that  separate  losses  and 
gains  cannot  be  shown  by  the  single  entry  method.  This  failure  to  show  the  separate 
losses  and  gains  constitutes  the  chief  disadvantage  of  single  entry  as  a  system,  and  is  the 
principal  reason  for  its  inferiority  to  double  entry. 

In  double  entry,  equal  debits  and  credits  are  recorded  for  every  transaction.  These 
are  posted  to  the  ledger.  As  the  debits  posted  are  exactly  equal  to  the  credits  posted, 
the  equality  of  the  two  sides  of  the  ledger  is  constantly  preserved.  If  the  trial  balance 
fails  to  exhibit  this  equality,  the  bookkeeper  at  once  knows  (provided  no  original  entry 
is  out  of  balance)  that  there  has  been  an  error  or  omission  in  posting.  When  the  single 
entry  method  is  used,  the  bookkeeper  has  no  such  systematic,  almost  automatic,  device 
for  the  detection  of  errors  of  this  kind  (errors  in  posting),  which  occur  more  frequently, 
probably,  than  all  others  combined. 

Double  entry  is  a  scientific  system  of  bookkeeping  by  which  the  chances  of  error  are 
reduced  to  the  mininum  and  under  which  it  is  possible  to  so  classify  and  analyze  the  busi- 
ness transactions  that  almost  any  desired  facts  in  regard  to  the  progress  or  condition 
of  the  business  can  be  ascertained.  Single  entry  is  an  unscientific  bookkeeping  expedient 
by  which  only  the  barest  facts  as  to  the  current  assets  and  liabilities  of  the  business  are 
set  forth  with  no  further  guarantee  of  their  accuracy  than  the  carefulness  of  the  book- 
keeper who  made  and  posted  the  entries. 


152 


APPENDIX 


A    SINGLE    ENTRT    SET 

Since  the  facts  which  are  to  be  recorded  in  single  entry  have  to  do  with  persons  and 
cash  only,  as  has  been  stated,  it  is  only  necessary  that  three  books  be  kept,  as  follows: 

(a)  The  Cash  Book,  in  which  are  kept  the  receipts  and  disbursements  of  cash. 

(b)  The  Day  Book,  in  which  debits  and  credits  to  personal  accounts  are  recorded 
as  they  occur. 

(c)  The  Ledger,  to  which  the  items  in  the  day  book  are  posted. 

Auxiliary  books  or  books  of  memorandum  of  almost  any  kind  can  be  kept  if  desired; 
as,  the  bill  book,  invoices  payable  register,  etc. 

TEE    CASH  BOOK 

The  single  entry  cash  book  usually  differs  in  form  from  the  double  entry  cash  book, 
though  not  necessarily  so.  The  accompanying  illustration  shows  the  first  few  cash  book 
entries  and  also  shows  the  method  of  ruling  for  balancing  the  book.  Note  that  the  Debit 
and  Credit  columns  are  side  by  side  on  the  same  page.  This  arrangement  affords  a  wide 
column  for  the  explanatory  matter  and  presents  the  debits  and  credits  in  the  order  in 
which  they  occurred.     Note  the  placing  of  the  dates,  and  do  not  forget  the  year  dates.* 


19— 


C.\SH  BOOK 


Cr. 


Oct. 

1 

1 

Cash  invested  as  per  Day  Book  entry      

Paid  rent  for  October,  1910,  by  check      

*** 

*+ 

*** 

6 

Paid  The  American  Cereal  Co.  in  full  of  account    .    . 

* 

** 

6 

Paid  Students'  salary  for  week  ending  Oct.  6     ... 

** 

** 

0 
6 

Received  from  cash  sales  as  per  Cash  Reg 

Balance      

** 

** 

*** 

** 

Balance       

*** 

** 

*** 

** 

Oct. 

*** 

** 

THE  DAY  BOOK 

This  book  corresponds  to  the  double  entry  journal  in  that  it  is  the  book  in  which  the 
original  entries  of  debits  and  credits  are  made  which  are  later  posted  to  the  ledger,  and 
in  the  fact  that  the- entries  are  made  as  the  transactions  occur  and  in  the  order  of  their 
occurrence.  It  is  also  somewhat  similar  in  form  and  ruling  to  the  double  entry  journal. 
But  here  the  resemblance  ends.  The  single  entry  day  book  does  not  record  equal  debits 
and  credits  as  does  the  double  entry  journal,  but  each  entry  records  a  single  debit  or  a 
single  credit,  as  the  case  may  be.  The  separate  items,  if  any,  are  written  in  the  left- 
hand  column  and  the  total  in  the  right-hand  column.  In  this  set  the  total  only  is  posted, 
but  the  separate  items  could  be  posted  instead,  if  preferred.  The  following  form  shows 
a  few  t^^pical  day  book  entries  for  the  single  entry  set. 

Note  that  opposite  the  name  of  each  account  debited  or  credited  in  the  day  book  is 
placed  the  abbreviation  Dr.  or  Cr.  This  is  the  means  of  indicating  which  side  of  the 
ledger  the  transaction  is  to  be  posted  to,  and  you  must  not  forget  to  write  it  as  you  make 
each  entry. 

♦These  and  other  forms  shown  in  this  chapter  are  intended  as  illustrations  merely,  and  are  DOt  to 
be  relied  upon  by  the  student  in  writing  entries  in  his  books. 


SINGLE   ENTRY 


153 


Note  that  the  transaction  on  Oct.  6  appears  in  both  the  cash  book  and  the  day  boolc. 
Whenever  any  money  is  paid  out,  an  entry  is  made  in  the  cash  book  to  show  the 
payment  of  cash;  if  the  payment  is  on  account,  another  entry  is  made  in  the  day  book 
to  show  the  debit  of  the  personal  account.  When  money  is  received  on  account,  an 
entry  crediting  the  person  is  made  in  tlie  day  book,  and  the  cash  received  is  recorded 
in  the  cash  register,  the  total  being  periodically  entered  in  the  cash  book  as  a  receipt, 
as  will  be  shown  later. 

DAY  BOOK 
October  1,  19— 


F.  P.  Nissen,  Proprietor  Cr. 

F.  P.  Nissen  is  engaged  in  the  retail  grocery  busi- 
ness at  105  Oak  Park  Ave.,  Oak  Park,  111.  His  assets 
at  this  time  are  as  follows: 

Cash  in  bank 

Cash  in  cash  register 

Stock  of  groceries  on  hand  valued  at 

Horse  and  wagon  valued  at 

I'urniture  and  fixtures  valued  at 

Accounts  receivable  as  follows. 

Mrs.  Wm.  Conant,  110  S.  East  Ave. 
Mrs.  Chas.  P.  French,  157  S.  East  Ave. 


Mrs.  Wm.  Conant,  110  S.  East  Ave. 
To  groceries  as  per  order  slip  No.  1 


Mrs.  Chas.  P.  French,  157  S.  East  Ave., 

By  cash  on  account 
.4 


Cr. 


H.  J.  Heinz  Co.,  1814  S.  Clark  St.,  Chicago 
3  doz.  Med.  Baked  Beans  and  Sauce 

1  doz.  10-oz.  Royal  Select  Queen  olives 

2  doz.  8-oz.  Octagon  Ketchup 


Cr 
1.40 


The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago  Dr. 
To  cash  in  full  of  account 


**+ 


THE  I.EDGEB 

The  single  entry  ledger  differs  from  the  double  entry  ledger  in  form  only,  though  it 
does  not  necessarily  differ  even  in  that  respect,  because  a  center-ruled  ledger  could  be 
used  as  well  for  single  entry  as  for  double  entry.  Following  is  an  illustration  of  the  form 
used  in  this  set. 

MRS.  WM.  CONANT 
19—  110  S.  East  Ave.  Dr.  Cr. 


Oct. 

1 

Balance  due 

** 

** 

1 

To  groceries  as  per  order  slip  No.  1 

* 

** 

5 

To  groceries  as  per  order  slip  No.  7 

* 

** 

6 

By  cash  as  per  Day  Book 

To  groceries  as  per  order  slip  No.  15 

** 

** 

** 

** 

8 

*  ** 

12 

To  groceries  as  per  order  slip  No.  22 

* 

** 

154 


Order   Slips 

Your  outfit  contains  a  pad  of  blank  order  slips.  These  ordinarily  come  in  dupli- 
cate and  are  filled  out  by  the  salesman,  who  sends  one  copy  with  the  goods  and 
one  copy  to  the  cashier's  desk.  Sometimes  order  slips  come  in  triplicate,  the  third 
copy  being  put  to  some  special  use  in  connection  with  either  the  accounting  of  delivery 
system. 

In  order  that  you  may  get  a  comprehensive  idea  of  the  procedure  in  the  retail  grocery  business,  you 
are  to  perform  a  part  of  the  duties  of  the  salesman  in  addition  to  your  v/ork  as  bookkeeper  and  cashier. 
As  salesman  you  are  to  fill  out  the  order  slips.  As  cashier,  you  have  charge  of  the  cash  register.  As  book- 
keeper you  make  the  proper  entries  in  the  books  for  all  transactions. 

The  duties  of  cashier  and  bookkeeper  are  so  intimately  connected  that  they  are  usually  performed 
by  the  same  person;  and  it  is  not  unusual,  especially  in  the  smaller  stores,  for  the  bookkeeper  and  cashier 
to  act  as  salesman  as  well,  especially  at  times  when  there  is  no  other  salesman  in  the  store,  or  when  an 
order  comes  by  telephone. 

The  pad  of  order  slips  which  accompanies  your  outfit  consists  of  single  slips.  It  will 
be  assumed  that,  as  salesman,  you  have  filled  them  out  in  duplicate  and  send  both  copies 

to  the  cashier,  who  after  stamping  on  the 
duplicate  the  date  and  number  of  the  sale, 
the  amount  and  kind  of  the  sale,  and  the 
initial  of  the  salesman  (all  done  automatic- 
ally by  the  cash  register  in  one  operation), 
has  sent  it  with  the  goods.  The  original, 
which  is  the  slip  you  fill  out,  is  filed.  When 
you  fill  out  an  order,  write  at  the  bottom 
the  expression  "Charged,"  "Paid,"  or 
"CO.  D.,"  as  the  case  may  be. 

Filled  orders  are  either  taken  away  by  the  cus- 
tomer or  sent  to  the  delivery  clerk  to  be  delivered, 
but  you  will  have  nothing  to  do  with  this  part  of 
the  work.  The  duplicate  order  slip  accompanies  the 
goods  whether  the  goods  are  taken  by  the  customer 
or  sent  to  the  delivery  clerk. 

The  order  slip  must  always  contain  the 
name  and  address  of  the  customer,  if  it  is  a 
charge  slip,  whether  the  goods  are  taken  by 
the  customer  or  delivered.  C.  0.  D.  goods 
are  always  delivered;  therefore  the  name  and 
address  must  always  be  written  on  a  C.  0.  D. 
slip.  In  the  case  of  paid  orders,  the  name 
and  address  of  the  customer  must  always 
be  shown  if   the  goods  are  to  be  delivered. 


F.  P.  NISSEN 
Groceries  AND  Meats 

Oak  Park,  111., i'^lL 19.— 

„  , .         Mrs.  William.  Conant 
Sold  to 

A              AHHr»«c    ^^0  -S-  East  Ave. 
Salesmsn Address 

Quan. 

ARTICLES 

Trice 

Amount 

1 

Leg  Spring  Lamb  S  lb. 

£0 

1 

00 

2 

cans  French  Peas 

15 

SO 

S 

heads  Lettuce 

IS 

u 

1 

bot.  Olive  Oil 

so 

1 

lb.  Butter 

2 

S8 
S3 

Charge 

i 

ORDER    SLIP 


Cash  Slips 
If  the  customer  pays  for  the  goods  and  takes  them  with  him,  an  order  slip  is  not  made 
out.     A  cash  slip  is  filled  out.     This  does  not  contain  the  name  and  address  of  the  cus- 
tomer, but  is  a  mere  list  of  the  items  sold,  with  the  total,  if  more  than  one  item  is  sold. 


SINGLE    ENTRY 


155 


At  the  top  of  the  slip  are  printed  the  wortis  "Pay  the  Cashier" — a  direction  to  tlie  cus- 
tomer.    The  cash  slips  are  numbered  consecutively    and    each   is  attached  to    a    stub 

which  bears  the  same  number,  on  which  the 
amount  of  the  sale  must  be  noted  at  the 
time  the  slip  itself  is  made  out. 


No.  1                                $    -^"f 

Porfor»t«d  IiB» 

F.  P.  NISSEN,  Groceries  and  Meats 

Pay  the  Cashier 

Salesman  .4 OAK  PARK.  ILL.,..f?/.^..19.— 

Quan. 

ARTICLE 

Price 

Araount 

2 

Bread 

05 

10 

1 

lb.  Bacon 

28 

1 

doz.  Eggs 



26 
~64 

1 

CASH   SLIP 


Customers'  Receipts 

When  a  customer  makes  a  payment  on 
account,  a  customers'  receipt  is  issued  for  the 
amount  recorded  in  the  cash  register  as  re- 
ceived. These  are  ordinarily  issued  in  dupli- 
cate; one  copy  is  given  to  the  customer  after 
being  placed  in  the  machine  and  stamped; 
the  other  copy  is  retained  and  filed. 

The  pad  of  customers'  receipts  which 
accompanies  your  outfit  consists  of  single 
slips.  These  are  to  be  filed  by  the  cashier, 
it  being  assumed  in  each  case  that  a  dupli- 
cate has  been  made,  stamped,  and  given  to 
the  customer. 

The  Cash  Register 

In  connection  with  the  retail  grocery 
business  which  is  illustrated  in  the  following 
single  entry  set,  it  is  assumed  that  the  student  as  cashier  uses  a  cash  register,  now  con- 
sidered to  be  an  almost  indispensable  adjunct  of  an  extensive  retail  business.  The  cash 
register  is  an  automatically-locking  device  for  holdmg  money,  which  can  be  unlocked 
and  opened  only  lay  pressing  buttons  or  keys  in  front.  There  are  five  rows  of  these  buttons 
consisting  of  nine  buttons  each  When  the  cashier  presses  the  proper  buttons,  the  money- 
drawer  opens  and  at  the  same  time  the  interior  mechanism  of  the  cash  register  automat- 
ically records  upon  a  narrow  roll  of  paper, 
called  the  "detail  strip,"  the  amount  of 
the  "sale  or  payment  together  with  the 
initial  of  the  salesman  and  the  kind  of 
sale  or  payment.  Cash  Sales,  Cash  Re- 
ceived on  Account,  C.  0.  D.  Sales,  C.  0.  D. 
Cash  Returns,  C.  0.  D.  Goods  Returned, 
Goods  Returned  on  Account,  Charge  Sales 
and  Cash  Sales,  are  all  recorded  on  the 
detail  strip  in  the  order  of  their  occurrence, 
and  each  kind  indicated  by  a  special 
abbreviation  or  sign.  The  machine  con- 
stantly shows  the  number  and  the  totals 
of  each  of  the  different  kinds  of  transac- 
tions recorded.  The  cash  register  has  one 
button  marked   "No   sale"    which  can   be  cash  register 


156 


APPENDIX 


pressed  when  the  cashier  wishes  to  open  the  register  without  recording  a  receipt  or 
sale,  as  when  it   might  be  desired  to  accommodate  some  one  by  changing  a  bill. 

Whenever  any  sale  or  payment  is  recorded,  the  cashier  inserts  in  the  machine  the 
duplicate  of  the  order  slip  or  other  voucher  used,  and  the  machine  automatically  stamps 
upon  it  the  record  of  the  transaction.  Some  machines  issue  little  cardboard  tickets  prop- 
erly stamped,  instead  of  printing  the  record  directly  upon  the  voucher.  These  stamped 
records,  whether  they  be  printed  upon  the  vouchers  or  upon  separate  tickets,  constitute 
a  check  upon  the  accuracy  and  honesty  of  the  cashier  and  show  the  customer  that  the 
proper  records  of  transactions  are  being  made. 

Cash  Register  Sheets 

As  it  is  not  practicable  for  each  student  to  have  a  cash  register,  there  are  provided 
for  each  outfit  several  sheets  of  paper  (Cash  Register  Sheets)  ruled  with  columns  to  I'epre- 
sent  the  different  kinds  of  transactions  for  which  the  cash  register  shows  separate  totals. 
Instead  of  actually  pushing  the  buttons  of  a  cash  register  and  thus  making  the  records 
on  the  detail  strip,  you  will  make  pen  and  ink  records  in  the  columns  of  the  specially  ruled 
sheets  provided. 


Cash  Register  Sheet 


Cash  Sales 

Cash 

Rec'd  on 

Aect. 

C.  O.  D. 

Sales 

C.  0.  D. 

Cash 
Returns 

C.  0.  D. 

Goods 

Return'd 

Goods 
Return'd 
on  Aect. 

Charge 
Sales 

Cash  Paid 
Out 

Change  in  register  (Jet.  1,  19 — 

**   ** 

*  ** 

*  ** 

*  ** 

*  ** 

*  ** 

** 

**   ** 

*   ** 

*  ** 

*   ** 

*   ** 

** 

*   ** 

*  ** 

*   ** 

*  ** 

** 

** 

*  ** 

*   ** 

*  ** 

**  ** 

**   ** 

*  ** 

*   ** 

0.00 

0.00 

**  ** 

**   ** 

File 

Accompanying  your  outfit  you  will  find  a  file  containing  three  sections.  This  file  is 
for  your  convenience  in  disposing  of  papers  that  you  make  out.  In  the  first  section 
C.  O.  D.  sales  slips  are  placed  temporarily  while  the  orders  are  being  delivered.  In  the 
second  section  are  placed  the  cash  slips,  the  paid  order  slips  (which  are  in  effect  the  same 
as  cash  slips),  the  C.  O.  D.  paid  slips,  and  the  customers'  receipts.  In  the  third  section 
are  placed  the  charge  sale  slips  and  also  the  goods  returned  slips.  It  is  assumed  that 
whenever  any  slip  of  any  kind  is  issued  one  copy  goes  in  our  files  and  one  copy  goes  to 
the  customer.  Note  that  the  papers  in  the  Cash  Sales  and  Cash  Receipts  section  of 
the  file  will  exactly  check  with  the  total  cash  receipts  as  shown  by  the  Cash  Register 
Sheet. 


SINGLE    ENTRY  157 

YOUK  DUTIES  SUMMAKIZED 

(1)  Fill  out  the  order  slips,  cash  sUps,  and  custoiiier's  receipts  as  these  are  required 

(2)  Make  pen  and  ink  records  on  the  Cash  Register  Sheets  of  amounts  which  would 
ordinarily  be  recorded  in  the  cash  register. 

(3)  Make  the  bookkeeping  entries. 

Following  is  a  list  of  the  different  kinds  of  transactions  and  the  procedure  in  each 
case,  except  as  to  the  filing,  directions  for  which  will  be  given  in  connection  with  specific 
transactions. 

(a)  Cash  sale,  taken.  Fill  out  a  cash  slip  and  record  the  amount  received  on  the 
Cash  Register  Sheet. 

(b)  Cash  Sale,  delivered.  Fill  out  an  order  slip  and  record  the  amount  received 
on  the  Cash  Register  Sheet. 

(c)  Cash  received  on  account.  Fill  out  a  customers'  receipt,  make  a  record  on  the 
Cash  Register  Sheet,  and  make  an  entry  in  the  day  book. 

(d)  C.  0.  D.  Sale      Fill  out  an  order  slip  and  make  a  record  on  the  Cash  Register  Sheet. 

(e)  C.  0.  D.  Cash  Returns.     Make  a  record  on  the  Cash  Register  Sheet. 

(f)  C.  0.  D.  Goods  Returned.     Make  a  record  on  the  Cash  Register  Sheet. 

(g)  Charge  Sale.  Fill  out  an  order  slip,  make  a  record  of  the  transaction  on  the 
Cash  Register  Sheet,  and  make  an  entry  in  the  day  book. 

(h)  Goods  Returned  on  Account.  Make  an  entry  on  the  Cash  Register  Sheet,  and 
give  the  customer  credit  in  the  day  book. 

(i)  Cash  Paid  Out.  Make  a  record  on  the  Cash  Register  Sheet  and  an  entry  in  the 
cash  book.     If  the  payment  be  on  account,  an  entry  in  the  day  book  is  also  necessary. 

(j)     Purchases  on  account  are  entered  in  the  day  book  as  they  occur. 

At  the  end  of  the  day,  or  whenever  it  seems  desirable,  the  Cash  Sales  column,  the  Cash 
Received  on  Account  column,  and  the  C.  0.  D.  Cash  Returns  column  of  the  Cash  Register 
Sheet  are  footed  and  added  together  and  the  grand  total  is  entered  in  the  cash  book  as 
a  receipt,  as  shall  be  explained  in  greater  detail  hereafter. 

In  entering  sales  on  account  in  the  day  book  it  is  not  necessary  to  itemize  them,  as 
we  have  itemized  records  on  the  order  slips  which  are  filed;  nor  is  it  necessary  to  itemize 
goods  purchased,  as  these  items  would  show  on  the  invoices  which  would  also  be  filed. 
Entries  of  purchases  should  show  the  date,  the  name  and  address  of  the  person  bought 
from,  the  terms  of  purchase  and  the  amount. 

In  working  the  following  transactions,  remember  that  there  are  only  two  things  we 
must  keep  account  of  in  Single  Entry:  (1)  Receipts  and  disbursements  of  cash,  (2)  Debits 
and  credits  affecting  personal  accounts.  Also  remember  that  no  entry  records  anything 
but  a  single  debit  or  a  single  credit. 

Before  beginning  the  work  of  the  set,  see  to  it  that  the  charge  slips  are  numbered  consecutively  from 
1  to  30,  that  the  cash  slips  and  their  corresponding  stubs  are  numbered  from  1  to  20,  and  that  the  custom- 
ers' receipts  are  numbered  from  1  to  10. 


$500.00 

67 

60 

5432 

69 

275.00 

450 

00 

$13.56 

23 

47 

5 

89 

27 

56 

16.27 

4.23 

12 

50 

6.78 

$27 

60 

8 

95 

23 

42 

17 

75 

124 

68 

158  APPENDIX 

TRANSACTIONS 

October  1,  19 — .  F.  P.  Nissen  is  engaged  in  the  retail  grocery  business  at  105  Oak 
Park  Ave.,  Oak  Park,  111.     His  assets  at  this  time  are  as  follows: 

Cash  in  bank* 

Cash  in  cash  register 

Stock  of  groceries  on  hand  valued  at 

Horse  and  wagon  valued  at 

Furniture  and  fi.xtures  valued  at 

Customers  owe  him  as  follows: 

Mrs.  Wm.  Conant,  110  S.  East  Ave. 

Mrs.  Chas.  P.  French,  157  S.  East  Ave. 

Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenilworth  Ave. 

Mrs.  Louis  N.  Mellick,  364  S.  Euclid  Ave. 

Mrs.  Ward.  N.  Seabury,  175  Forest  Ave. 

Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest  Park 

Mrs.  Wm.  Beye,  264  Wisconsin  Ave. 

Mrs.  Phillip  Furbeck,  1110  South  Boulevard 
His  liabilities  are  as  follows: 

National  Biscuit  Co.,  110  N.  Morgan  St.,  Chicago 

The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago 

H.  J.  Heinz  Company,  1814  S.  Clark  St.,  Chicago 

Armour  &  Co.,  239  S.  Water  St.,  Chicago 

Washburn-Crosby  Co.,  145  Van  Buren  St.,  Chicago 

Steps  necessary  to  open  the  single  entry  books 

1.  Enter  in  the  cash  book  the  amount  of  cash  on  hand. 

2.  Open  accounts  in  the  ledger  with  the  proprietor,  all  customers,  and  all  creditors, 
in  the  order  named,  allowing  one-third  of  a  page  for  each  account.  Enter  in  the  cus- 
tomers' and  creditors'  accounts  the  balances  shown  by  the  opening  statement. 

3.  Make  a  day  book  entry  crediting  the  proprietor  with  the  total  of  the  assets  of  the 
business,  listing  the  items  at  the  bottom  of  the  entry.  Make  another  entry  debiting  the 
proprietor  with  the  total  of  the  liabilities  of  the  business,  listing  the  items  below.  Post 
both  of  these  entries  to  the  proprietor's  account  on  page  1  of  the  ledger. 

After  opening  the  books  as  above,  enter  the  amount  of  change  on  hand  ($67  60)  or, 
one  of  the  Cash  Register  Sheets,  at  the  top  of  the  left-hand  column,  with  the  explanatioii 
"Change  on  hand  Oct.  1,  19 — ."  Give  the  sheet  the  number  1.  You  are  now  read> 
for  business. 

OCTOBER  1.  ID- 
Transaction  No.  1.      Paid  rent  for  Octol>er  [ly  check,  $100.00. 

Enter  this  in  the  cash  book  only.  A«  the  payment  was  Ijy  check,  tlie  transaction  is  not  recorded  o, 
the  Cash  Register  Sheet. 

Transaction  No.  2.  Sold  for  cash  2  loaves  bread,  at  5(t;  1  lb.  bacon,  28^;  1  do;, 
eggs,  26^,. 

Make  out  a  cash  sliii.  Record  the  amount  received  on  the  Cash  Register  Sheet,  in  the  left-hand  column 
File  the  cash  slip  in  the  section  of  the  file  marked  Cash  Sales  and  Cash  Receipts. 

*  The  student  is  not  required  to  keep  a  bank  pass  book,  but  whenever  necessary  he  will  be  told  what 
the  bank  balance  is. 


SINGLE    ENTRY  159 

Transaction  No.  3.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1  leg 
of  spring  lamb,  5  lbs,  at  20(^;  2  cans  French  peas,  at  15^;  2  heads  lettuce,  at  120;  1  bottle 
olive  oil,  300;  1  lb    butter,  380. 

Make  out  an  order  slip,  writing  the  word  Charge  or  the  abbreviation  Chy.  at  the  bottom  of  the  slip 
Then  record  the  amount  of  the  sale  in  the  Charge  Sales  column  of  the  Cash  Register  Sheet,  and  make  the 
day  book  entry  charging  Mrs.  Wm.  Conant.  When  this  has  been  done  file  the  order  slip  in  the  section 
of  the  file  marked  Charge  Sales. 

Transaction  No.  4.     Sold  for  cash  1  can  lobster,  250. 

Proceed  exactly  as  described  in  the  note  of  explanation  under  Transaction  No.  2. 

Transaction  No.  6.  Sold  to  Mrs.  Chas.  P.  French,  157  S  East  Ave-,  on  account, 
2  boxes  soda  crackers,  at  100;  1  can  French  peas,  150;  1  box  Coleman's  mustard,  150; 
2  heads  cabbage,  at  100;  1  sack  salt,  100;  1  can  salmon,  150;  3  loaves  bread,  at  50,  1  lb. 
imported  Swiss  cheese,  400. 

Proceed  exactly  as  described  in  the  note  of  explanation  under  Transaction  No   3 

OCTOBEB  2 

Transaction  No.  6.  Sold  to  Jas  H.  Greenman,  231  Woodward  Terrace,  for  cash, 
to  be  delivered,  2J  lbs.  halibut  steak,  at  180;  J  doz.  Florida  oranges,  at  500;  2  cans  Tele- 
phone peas,  at  12^0;  2  cans  Cupid  fancy  tomatoes,  at  12J0;  1  8-lb.  box  prunes,  850. 

Make  out  an  order  slip,  writing  the  word  Paid  at  the  bottom.  Record  the  amount  of  the  sale  in  the 
left-hand  column  of  the  Cash  Register  Sheet.  Place  the  order  slip  in  the  section  of  the  file  marked  Cash 
Sales  and  Cash  Receipts. 

Transaction  No.  7.  Sold  for  cash  1  jar  Southwell's  imported  marmalade,  230;  1  lb. 
creamery  butter,  360;  2  boxes  soda  crackers,  at  100. 

Follow  the  instructions  given  in  the  note  under  Transaction  No.  2,  and  in  future  always  follow  this 
procedure  when  a  sale  for  cash  is  made  which  is  not  to  be  delivered. 

Transaction  No.  8.  Sold  on  account  to  Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenil- 
worth  Ave.,  3  lbs.  Star  ham,  sliced,  at  280;  1  box  Coleman's  mustard,  150;  3  loaves  bread, 
at  50;  1  lb.  creamery  butter,  360;  ^  lb.  imported  Swiss  cheese,  at  400;  2  pkgs.  Uneeda 
biscuit,  at  50;  2  cans  Heinz  baked  beans  and  tomato  sauce,  at  150. 

Follow  the  instructions  given  under  Transaction  No.  3,  and  in  future  always  follow  this  procedure 
when  a  sale  on  account  is  made. 

Transaction  No.  9.  Sold  to  Mrs.  Paul  Peters,  740  Chicago  Ave.,  for  cash,  to  be 
delivered,  2  pkgs.  Saratoga  flakes,  at  150;  2  pkgs.  Quaker  oats,  at  100;  3  cans  Monarch 
canned  corn,  at  150;  3  cans  Monarch  canned  peas,  at  150;  1  broom,  400;  1  bottle  bluing, 
100;  3  bars  Naphtha  soap,  at  50. 

Follow  the  instructions  given  in  the  note  under  Transaction  No.  6,  and  in  future  always  follow  this 
procedure  when  a  sale  is  made  for  cash  to  be  delivered. 

Transaction  No.  10.     Received  of  Mrs.  Chas.  P.  French  $10.00  on  account. 

Fill  out  a  customer's  receipt.  Enter  the  amount  received  on  the  Cash  Register  Sheet,  in  the  column 
headed  Cash  Received  on  Account.  Make  a  day  book  entry  crediting  the  customer.  Place  the  customer's 
receipt  in  the  section  of  the  file  marked  Cash  Sales  and  Cash  Receipts. 

These  slips  are  usually  kept  on  a  spindle  until  the  cashier  can  find  time  to  enter  them,  and  the  same 
thing  is  done  with  charge  orders,  receipts  for  or  memorandums  of  cash  paid  out,  etc.,  but  the  student 
will  make  all  day  book  entries  and  cash  credit  entries  as  the  transactions  occur. 


160 


OCTOBER  3 


Transaction  No.  11.  Sold  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  C.  O.  D.,  the  follow- 
ing groceries:  25  lbs.  W.  C.  Superlative  flour,  at  5^;  2  pecks  apples,  at  600,  3  lbs.  Star 
bacon,  sliced,  at  280. 

Fill  out  au  order  slip,  writing  C.  0.  D.  at  the  bottom  of  it.  Enter  the  amount  of  the  sale  on  the  Cash 
Register  Sheet,  in  the  column  headed  C.  O.  D.  Sales,  and  place  the  order  slip  temjiorarily  in  the  section 
of  the  file  marked  C.  0.  D.  Sales. 

Transaction  No.  12.  Sold  for  cash  2  pecks  Irish  potatoes,  at  200;  two  cans  Monarch 
canned  com,  at  150;  two  cans  Monarch  canned  peas,  at  150. 

Transaction  No.  13.  The  delivery  boy  returns  with  $3.29,  as  returns  on  the  C.  O.  D. 
sale  to  Mrs.  C.  V.  Clark. 

If  this  is  the  correct  amount,  enter  it  on  the  Cash  Register  Sheet  in  the  coknnn  }ieaded  C.  O.  D.  Cash 
Returns.  Take  the  C.  O.  D.  slip  from  the  section  of  the  file  marked  C.  O.  D.  Sales,  write  on  it  the  word 
Paid,  and  place  it  in  the  section  marked  Cash  Sales  and  Cash  Receipts. 

OCTOBER  4 

Transaction  No.  14.  Bought  of  H.  J.  Heinz  Company,  1814  S.  Clark  St.,  Chicago, 
III,  on  30  days'  time,  the  following  bill  of  groceries: 

3  doz.  Med.  Baked  Beans  and  Sauce,  at  $1.40         $4.20 

1  doz.  10-oz.  Royal  Select  Queen  Olives,  for  2.75 

2  doz.  8-oz.  Octagon  Ketchup,  at  1.35  2.70         $9.65 

Make  an  entry  in  the  day  book,  crediting  H.  J.  Heinz  Company.  This  entry  should  contain  the 
explanation  "Terms,  30  days."  No  further  instruction  will  be  given  as  to  the  procedure  in  handlin;; 
an  entry  of  this  kind. 

Transaction  No.  16.  Sold  for  cash  2  cans  Heinz  medium  baked  beans  and  tomato 
sauce,  at  150;  1  bottle  Royal  select  queen  olives,  250;  2  cans  Monarch  canned  corn,  at  150. 

Transaction  No.  16.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1 
doz.  eggs,  360;  1  leg  of  spring  lamb,  4^  lbs.  at  200;  2  cans  French  peas,  at  150,  1  peck 
Irish  potatoes,  200. 

OCTOBER  6 

Transaction  No.  17.  Sold  to  W.  J.  Frazer,  767  W.  Madison  St.,  for  cash,  to  be 
delivered,  1  can  lobster,  250;  1  bottle  Queen  Olives,  250;  2  loaves  Quaker  bread,  at  50. 

Transaction  No.  18.     Received  $5.00  from  Mrs.   Edwin  C.   Hedrick,   Jr.,  on  account. 

Follow  the  instructions  in  the  note  under  Transaction  No.  10. 

Transaction  No.  19.  Paid  The  American  Cereal  Co.,  9  Jackson  Boul.,  Chicago, 
$8.95,  the  amount  of  their  account  against  us,  from  the  Cash  Register. 

Record  this  in  the  Cash  Paid  Out  column  of  the  Cash  Register  Sheet.  Make  a  cash  book  entry  at 
this  time,  and  make  an  entry  in  the  day  book  debiting  The  American  Cereal  Co. 

Transaction  No.  20.  Sold  for  cash  6  cans  Heinz  baked  beans  and  tomato  sauce, 
at  150;  2  bottles  Heinz  tomato  catsup,  at  150;  5*  lbs.  Star  ham,  sliced,  at  280;  6  lbs.  Star 
ham,  butts,  at  120;  6  lbs.  Star  bacon,  sliced,  at  280. 

Transaction  No.  21.  Sold  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave.,  on  account, 
3i  lbs.  shoulder  lamb  chops,  at  140;  3  cans  French  peas,  at  150;  3  heads  lettuce,  at  120; 
50  lbs.  W.  G.  Superlative  flour,  at  50. 


SINGLE    ENTRY 


161 


Transaction  No.  22.  Sold  to  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  on  account, 
one  spring  chicken,  4}  lbs-  at  200;  2  ll^s.  creamery  butter,  at  360;  2  loaves  bread,  at  50; 
3  cans  salmon,  at  150;  1  broom,  400;  1  bottle  bluing,  100;  3  bars  Naphtha  soap,  at  50. 

Transaction  No.  23.  Received  of  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  .cash  in  full 
of  account,  $17.54. 

Transaction  No.  24.  Sold  to  Jas.  W.  Wilson,  317  Chnton  Ave.,  for  cash,  to  be 
delivered,  4  grape  fruit,  at  200;  3^  lbs.  Malaga  grapes,  at  200;  3  pkgs.  Cottage  cheese, 
at  150;  6  cans  assorted  soups,  at  300;  1  lb.  Young  Hyson  tea,  800;  2  qts.  Baltimore  oysters, 
at  350;  6  pkgs.  Saratoga  flakes,  at  150. 

Transaction  No.  25.  Sold  for  cash  3  lbs.  Finnan  haddie,  at  150;  2  lbs.  creamery 
butter,  at  360;  3  loaves  rye  bread  at  100;  1  sack  salt,  100;  3  heads  cabbage  at  100;  1  box 
Coleman's  mustard,   150. 

Transaction  No.  26.  Received  from  Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenil- 
worth  Ave.,  cash  to  balance  her  account,  $2.99. 

Transaction  No.  27.  Paid  the  salary  of  the  bookkeeper  and  cashier  (yourself)  for 
the  week,  $12.50,  from  the  Cash  Register. 

Record  the  payment  on  the  Cash  Register  Sheet,  in  the  column  headed  Cash  Paid  Out.  Make  the 
proper  entry  and  explanation  in  the  cash  book. 

Post  to  the  ledger  all  day  book  entries  that  have  not  j^et  been  posted;  rule  and  foot 
all  accounts  that  are  paid  in  full.  Close  the  Cash  Register  Sheet  as  illustrated  and 
described  below. 


ILLUSTRATION    OF    CLOSING   OF    CASH    REGISTER    SHEET 


Footings 

** 
** 

** 
** 

**  ** 

*  ** 

*  ** 

0.00 
*  ** 

0.00 

**  ** 
0.00 

**  ** 

Deduct  change 

Entered 

in  cash 

book,  p 

** 
** 

** 
** 
** 

*  ** 

Spot  cash  sales 

**  ** 

**  ** 

*  ** 

Net  Chg.  Sales 

C.  0.  D.  cash  returns 
Cash  Rec'd.  on  Acct. 

age  — . 

Cash  Sales 
C.  O.  U.  Sales 

Total  cash  Rec'd. 
Cash  Pd.  out 

** 
** 

** 
** 

**  ** 

Total  Sales 

Excess  of  receipts 
Change  on  hand 

** 
** 

** 
** 

Cash  in  register 
Deposit  Oct.  6,  19— 

vv* 

** 
** 

Change  in  register  Oct.  8,  19 — 

** 

** 

Rule  a  single  line  across  the  eight  columns  of  the  Cash  Register  Sheet,  underneath 
the  last  item  in  the  longest  column,  and  add  all  columns.  Then  proceed  as  follows:  (1) 
Deduct  the  amount  of  the  change  on  hand  Oct.  1  from  the  total  of  the  first  column.  The 
result  will  be  the  total  of  cash  sales.  (2)  Reconcile  the  three  C.  O.  D.  columns  (i.e.,  deter- 
mine whether  the  C.  0.  D.  Cash  Returns  and  the  C.  0.  D.  Goods  Returned  added  equal 
the  C.  0.  D.  Sales  Rule  these  columns  as  shown  in  the  model  form  and  write  the  amount 
of  the  C.  0.  D.  Cash  Returns  in  the  left-hand  column  of  the  Cash  Register  Sheet,  beneath 
the  total  of  spot  cash  sales.  (3)  Write  in  the  left-hand  column  the  amount  of  the  cash 
received  on  account  and  rule  a  double  line  across  the  Cash  Received  on  Account  column. 
(4)  Add  the  three  totals  now  shown  in  the  left-hand  column.  The  result  is  the  total  of 
cash  received.  (5)  Write  beneath  this  the  total  of  the  cash  paid  out,  and  deduct  it  The 
result  is  the  excess  of  receipts  over  disbursements  for  the  week.     (6)  Add  the  amount 


162 


APPENDIX 


of  the  change  on  hand,  167.60,  which  will  give  you  the  total  of  cash  in  the  cash  register. 
(7)  Deposit  $50.00,  keeping  |**.**  for  change.  Deduct  the  amount  of  the  deposit,  rule, 
and  carry  forward  the  amount  of  change  on  hand,  all  as  shown  in  the  model.  (8)  The 
only  columns  not  yet  ruled  up  are  the  Charge  Sales  and  Goods  Returned  on  Account  columns. 
Deduct  the  total  of  the  latter  column  from  the  total  of  the  former.  The  result  is  the 
net  charge  sales.  Add  the  total  of  cash  sales  and  the  total  of  C.  0.  D.  paid  sales  to  the 
net  charge  sales,  to  show  the  total  of  all  kinds  of  sales  for  the  week.  (9)  The  total  of 
cash  received  during  the  week  must  be  entered  in  the  cash  book  and  a  notation  to  the 
effect  that  this  has  been  done  should  be  made  on  the  Cash  Register  Sheet,  as  shown.  The 
cash  payments,  it  will  be  observed,  have  already  been  entered  in  the  cash  book,  these 
entries  having  been  made  separately  as  the  transactions  occurred. 

In  business,  this  closing  of  the  cash  register  is  usually  done  daily.  The  report  on  business  done,  as 
shown  on  your  Cash  Register  Sheet  between  the  two  lines  extending  entirely  across  the  form,  is  usually 
prepared  on  a  special  daily  report  blank,  and  summaries  of  these  daily  reports  are  prepared  weekly  or 
monthly. 

When  your  Cash  Register  Sheet  has  been  approved  by  your  teacher,  write  the  amount 
of  change  on  hand  at  the  top  of  another  Cash  Register  Sheet,  giving  it  the  number  2,  and 
enter  the  transactions  for  the  week  beginning  Oct.  8. 


OCTOBER  8 

Transaction  No.  28.  Sold  for  cash  5  packages  Saratoga  Flakes,  at  15^;  3  packages 
Quaker  oats,  at  10<(;  4  cans  Heinz  baked  beans  and  tomato  sauce,  at  15^;  2  bottles  Queen 
olives,  at  25^;  5  loaves  bread,  at  50. 

Transaction  No.  29.  Bought  for  cash,  from  the  Heissler  &  Junge  Co.,  301  W.  39th 
St.,  Chicago,  100  loaves  Quaker  bread,  at  4(i,  paying  the  money  from  the  cash  register. 

Transaction  No.  30.  Sold  on  account  to  Mrs.  Wm.  Beye,  264  Wisconsin  Ave.,  2 
bottles  Heinz  tomato  catsup,  at  15^S;  1  whole  Star  ham,  15  lbs.  at  26(i;  3  lbs.  Star  bacon, 
sliced,  at  28^;  4  cans  Monarch  canned  corn,  at  150;  3  loaves  bread,  at  50;  3  bars  Ivory 
soap,  at  50. 

Transaction  No.  31.  Paid  $3.00  from  the  cash  register  for  one  year's  subscription 
to  the  Grocers'  Guide  and  Holly  Journal,  the  subscription  to  begin  with  the  November  issue. 

Transaction  No.  32.  Sold  on  account  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave., 
3  cans  Monarch  canned  peas,  at  150;  2  pks.  Northern  Spy  apples,  at  600;  4  pks.  Irish 
potatoes,  at  200  a  peck;  25  lbs.  W.  C.  Superlative  flour,  at  50;  1  bottle  bluing,  100;  2  lbs. 
Oswego  starch,  at  50;  2  doz    clothespins,  50. 

Transaction  No.  33.  Bought  on  account  of  Reid,  Murdock  &  Co.,  cor.  Lake  and 
Market  Sts.,  Chicago,  the  following  invoice  (the  explanations  in  parenthesis  do  not  appear 
on  the  face  of  the  bill): 


Doz. 

Price 

30  Days 

60  Days 

Total 

5  cs.  (cases)  Monarch    #2  corn  (in  tins,  2  dz.  ea.) 

2   "                          "         #2  E.  J.  (early  June)  peas  (in  tins, 

2  dz.  ea.) 
2   "                         "         #1  Tall  salmon  (in  tins,  4  dz.  ea.) 

6  "                         "         #3  Tomatoes  (in  tins,  2  dz.  ea.) 

10 

4 
8 
10 

81.20 

1 . 7.5 
2.10 
1.35 

$16.80 

$12.00 
7.00 
13.50 

$16.80 

$.32 .  50 

149.30 

SINGLE    ENTRY  163 

Transaction  No.  34.     Bought  of  The  American  Cereal  Co.,  Chicago,   111.,  on  account 

30  days, 

4  cases  Quaker  oats,  at  3.00  $12.00 

1  brl.  Oatmeal  5 .  50         $  1 " .  50 


Transaction  No.  35.  Sold  for  cash  1  leg  of  spring  lamb,  4J  lbs.  at  20^;  2  cans  tall 
salmon,  at  27i^;  3  cans  E  J  Peas,  at  20^;  2  heads  lettuce,  at  12fi;  3  loaves  bread,  at  5i; 
2  boxes  B  &  C  matches,  at  5^. 

Transaction  No.  36.  Sold  to  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  on  account, 
2  cans  lobster,  at  25^;  3  boxes  soda  crackers,  at  10^;  1  bottle  olive  oil,  30^;  2  llis.  creamery 
butter,  at  36(',  1  loaf  bread,  5^;  1  sack  salt,  10^. 

Transaction  No.  37.  Received  of  Mrs.  Chas.  P.  French,  157  S.  East  Ave.,  cash 
in  full  of  account. 

Find  the  balance  due  as  shown  by  the  ledger.  Note  the  date  of  the  last  purchase,  and  look  ttrougli 
the  day  book,  from  that  date  on,  to  find  whether  there  are  any  debits  and  credits  to  be  posted  to  her  account. 

Transaction  No.  38.  Sold  on  account  to  Mrs.  Wm.  Conant,  110  S.  East  Ave  ,  2  lbs. 
creamery  butter,  at  36(i;  2  doz.  eggs,  at  36^;  1  spring  chicken,  5i  lbs.  at  200;  6  grape  fruit, 
at  200;  2+  lbs.  Malaga  grapes,  at  200;  3  lbs.  cottage  cheese,  at  150;  2  bottles  Queen  olives, 
at  250;  3  loaves  bread,  at  50. 

OCTOBER  10 

Transaction  No.  39.  Sold  for  cash,  5+  lbs.  shoulder  of  lamb,  at  120;  2  lbs.  creamery 
butter,  at  360;  3  cans  E.  J.  peas,  at  200;  1  sack  salt,  100;  25  lbs.  W.  C.  Superlative  flour, 
at  50;  1  lb.  India  Ceylon  tea,  600. 

Transaction  No.  40.  Sold  C.  0.  D.  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  4  lbs.  smelts, 
at  140;  1  Ijottle  Queen  olives,  250;  1  lb.  butter,  300;  3  loaves  rye  bread,  at  50. 

Transaction  No.  41.  Mrs.  Louis  N.  Mellick,  364  Euclid  Ave.,  returned  2  cans  of 
lobster  purchased  Oct.  8,  claiming  both  cans  were  spoiled. 

Enter  this  amount  in  the  Goods  Returned  on  Account  column  of  the  Cash  Register  Sheet.  Give  Mrs. 
Mellick  credit  in  the  day  book.  Make  out  a  credit  memorandum  as  follows:  "Oct.  10,  1910.  Credit 
Memorandum.     Mrs    Louis  N.  Mellick,  364  Euclid  Ave.     We  credit  your  account  500  for  2  cans  lobster 

returned.     F.  P.  Nissen  by  ."     Assuming  that  you  have  given  Mrs.  Mellick  one  copy  of  this, 

place  the  credit  memo  in  the  file  with  the  Charge  Sales. 

Note:  Many  retail  grocers  keep  the  customers'  charge  tickets  filed  alphabetically  under  the  customers' 
names.  This  makes  reference  easy  in  case  of  dispute.  Some  firms  keep  no  ledger,  but  rely  entirely  upon 
the  slips.  This  is  not  a  very  reliable  plan,  however,  unless  the  balances  are  carried  forward  from  one 
slip  to  the  ne.xt,  as  in  the  system  known  as  the  McCaskey  continuous  account  system.  When  this  system 
is  followed  any  payment  made  is  deducted  from  the  balance  shown  by  the  last  order  slip,  so  that  the  last  slip 
made  out  always  shows  the  balance  due.     The  slips  are  filed  alphabetically  under  the  customers'  names. 

One  system  that  is  sometimes  used  by  grocers  who  have  a  comparatively  small  number  of  customers 
is  as  follows:  One  charge  order  book  with  numbered  pages  is  kept  for  each  customer  who  has  an  account. 
When  a  charge  order  is  to  be  made  out,  the  clerk  secures  the  customer's  individual  book  and  writes  the 
order  in  it  direct,  or  else  he  hands  the  cashier  a  memorandum  of  the  filled  order  and  the  cashier  writes 
in  the  customer's  book.  One  copy  of  the  charge  slip  goes  with  the  goods,  while  the  other  copy  stays  in 
the  book.     The  balance  is  carried  forward  from  slip  to  slip,  as  in  the  system  described  in  the  last  paragraph. 

Transaction  No.  42.  Sold  on  account  to  Mrs.  Chas.  P.  French,  157  S  East  Ave  , 
1  doz.  eggs,  300;  2  lbs.  Clover  Leaf  creamery  butter,  at  360;  1^  lbs.  Wisconsin  cream  cheese, 
at  260;  2  cans  Queen  Maud  sardines,  at  250;  1  doz.  oranges,  250;  8  qts.  new  Bermuda 
potatoes,  at  90. 


164  APPENDIX 

Transaction   No.  43.     Purchased    on   30  days'    credit   from   Armour   &   Co.,   239  S. 

Water  St.,  Chicago, 

12  Star  Hams,  180  lbs.  at  15^  $27.00 

16  pes.  Star  Bacon,  120  lbs.  at  22^  26.40         $53.40 


Transaction  No.  44.  Sold  to  Mrs.  Phillip  Furbeck,  1110  S.  Boulevard,  C.  O.  D., 
one  Star  ham,  15  lbs.  at  25^. 

Transaction  No.  45.     Sold   for   cash   3   lbs.    chopped   beef,    at    16^;  1  doz.    eggs,  30^; 

2  lb.s.  creamery  butter,  at  36(t;  25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  46.  Sold  on  account  to  Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest 
Park,  65  lbs.  Star  ham  butts,  at  80;  1  can  Monarch  canned  corn,  150;  3  loaves  bread,  at 
50;  ?r  lb.  butter,^at  300;  2  lbs.  sausage  meat,  at  200;  3  bars  Naphtha  soap,  at  50. 

Transaction  No.  47.  Mrs.  N.  N.  Richards,  154  Circle  Ave.,  Forest  Park,  paid  $1.00 
on  account. 

Transaction  No.  48.  Sold  for  cash  3  lbs.  smoked  halibut,  at  250;  2  lbs.  imported 
Swiss  cheese,  at  400;  1  lb.  creamery  butter,  360;  3  loaves  bread,  at  50. 

Transaction  No.  49.  The  delivery  boy  returned  with  the  correct  amount  of  cash 
in  payment  of  the  C.  0.  D.  order  sold  to  Mrs.  C.  V.  Clark,  789  Lake  St. 

(See  the  note  under  Transaction  No.  13.) 

Transaction  No.  50.  The  delivery  boy  reported  that  no  one  was  at  home  when  he 
called  at  the  residence  of  Mrs.  Phillip  Furbeck  to  deliver  the  C.  O.  D.  order  He  there- 
fore brought  the  goods  back. 

Enter  the  amount  of  the  order  on  the  Cash  Register  Sheet  in  the  column  headed  C.  O.  D.  Goods  Returned. 
In  business  the  delivery  boy  would  bring  back  the  duplicate  order  slip  with  the  goods.  This  would  be 
marked  "Goods  Returned"  and  filed.  You  may  make  a  memorandum  of  the  goods  returned  (virtually 
a  copy  of  the  order  slip)  mark  it  "Goods  Returned,"  and  place  it  in  the  section  of  the  file  marked  C.  O.  D 
Goods  Returned. 

OCTOBEB  12 

Transaction  No.  61.     Sold  to  J.  N.  Ward,  679  Chicago  Ave.,  for  cash,  to  be  delivered, 

3  grape  fruit,  at  200;  1  doz.  oranges,  400;  1  doz.  eggs,  300;  2  lbs.  creamery  butter,  at  360; 
2\  lbs.  Star  bacon,  sliced,  at  280;  3  pkgs.  Uneeda  biscuit,  at  50;  2  loaves  bread,  at  50. 

Transaction  No.  62.  Sold  to  Mrs.  C.  V.  Clark,  789  Lake  St.,  C.  0.  D.,  2  cans  Pride 
of  Chicago  tall  salmon,  at  180;  3  loaves  bread,  at  50;  1  8-lb.  box  prunes,  850;  1  lb.  India 
Ceylon  tea,  600. 

Transaction  No.  53.  Sold  for  cash  2  pks.  Northern  Spy  apples,  at  600;  3  pks.  Irish 
potatoes,  at  200;  25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  54.  Sold  to  Mrs.  Wm.  Conant,  110  S.  East  Ave.,  on  account,  1  leg 
of  spring  lamb,  4i  lbs.  at  200;  4  lbs.  Star  bacon,  sliced,  at  280;  3  heads  lettuce,  at  120; 
3  cans  E   J.  peas,  at  200. 

OCTOBEE  13 

Transaction  No.  65.  Sold  for  cash  1  lb.  India  Ceylon  tea,  600;  10  lbs.  sugar,  at  50; 
3  pkgs  Nabisco,  at  100;  3  pkgs.  Uneeda  biscuit,  at  50. 

Transaction  No.  66.  Sold  to  Mrs.  Chas.  P.  French,  157  S.  East  Ave.,  to  be  charged, 
3  grape  fruit,  at  200;  20  lbs.  sugar,  at  50;  2^  lbs.  Malaga  grapes,  at  200;  4  pkgs.  Nabisco, 
at  100. 


SINGLE    ENTRY  .  1G5 

Transaction  No.  57.  Mrs.  Ward  N.  Sealniry,  175  Forest  Ave.,  paid  her  account 
iia  full. 

Kemi  the  note  under  Transaction  No.  37  for  directions  for  determining  the  amount  of  the  balance  due. 

Transaction  No.  68.  Sold  to  Mrs.  Edwin  C.  Hedrick,  Jr.,  124  N.  Kenilworth,  on 
account,  to  be  delivered,  3j  lbs.  smoked  halibut,  at  16^,  1  whole  Star  ham,  15  lbs.  at  27J0; 
1  bottle  Heinz  tomato  catsup,  150;  1  bottle  Queen  olives,  250;  10  lbs.  granulated  sugar, 
at  50;  1  lb.  butter,  300;  3  loaves  bread,  at  50. 

Transaction  No.  69.     Bought  of  Reid,  Murdock  &  Co.,  on  thirty  days'  credit: 
3  half-chests  Young  Hyson  tea,  194#  at  350  $67.90 

2  cases  Monarch  coffee,  2#  cans,  96  lbs.  at  270  25 .  92 

2  cases         "         #2  E.  J.  peas,  4  doz.  at  $1.75  7.00 

3  cases         "         #10  peaches,  6  doz.  cans  at  $2.50  15.00         $115.83 

Transaction  No.  60.  Sold  for  cash  3J  lbs.  porterhouse  steak,  at  220;  2  lbs.  creamery 
butter,  at  360;  20  lbs.  sugar,  at  50;  3  loaves  bread,  at  50. 

Transaction  No.  61.  Took  from  the  cash  register  enough  money  to  pay  the  National 
Biscuit  Company's  account  in  full. 

This  payment  is  recorded  on  the  Cash  Register  Sheet  and  entries  are  made  in  tlie  casli  book  and  in 
the  day  book,  as  explained  in  connection  with  previous  similar  transactions. 

Transaction  No.  62.  Sold  on  account  to  Mrs.  Ward  N.  Seabury,  175  Forest  Ave., 
4J  lbs.  rib  lamb  chops,  at  220;  1  bottle  mint  sauce,  250;  2  cans  E.  J.  peas,  at  200;  3  loaves 
bread,  at  50;  10  lbs.  granulated  sugar,  at  50;  25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  63.     Bought  of  H.  J.  Heinz  Company,  on  account: 

4  doz.  cans  apple  butter,   at  $1.50  $6.00 
3     "       "     peach        "       at    1.50  4.50 

6      "     small  crocks  strawberry  preserves,  at  $1 .35  8.10         $18.60 

Transaction  No.  64.  Sold  for  cash  3  qts.  Baltimore  oysters,  at  350;  4  lbs.  oyster 
crackers,  at  90;  2  bottles  Heinz  tomato  catsup,  at  150;  10  lbs.  granulated  sugar,  at  50; 
25  lbs.  W.  C.  Superlative  flour,  at  50. 

Transaction  No.  65.     Sold  on  account  to   Mrs.  Phillip   Furbeck,    1110  S.   Boulevard, 

1  doz.  eggs,  300;  2  lbs.  creamery  butter,  at  360;  H-  lbs.  imported  Swiss  cheese,  at  400; 

2  loaves  rye  bread,  at  50;  3i  lbs.  Star  bacon,  sliced,  at  280. 

Transaction  No.  66.  Mrs.  Wai'd  N.  Seabury,  175  Forest  Ave.,  returned  1  bottle 
mint  sauce  purchased  today. 

See  Transaction  No.  41  for  instructions. 

Transaction  No.  67.     Paid  the  scrub-woman  $1.50  for  her  work  today. 

Transaction  No.  68.     P.aid  the  bookkeeper's  salary,  .$12.50. 

Post  the  entries  in  the  day  book,  rule  up  any  ledger  accounts  that  balance,  foot 
and  close  the  Cash  Register  Sheet,  and  enter  on  the  cash  book  the  amount  of  cash 
received,  as  you  did  on  Oct    6.     Deposit  $50.00.     Close  the  cash  book. 

Single  Entry  Statement 
As  has  been  previously  explained,  it  is  impossible  to  show  the  separate  losses  and  gains  in  single  entr}^ 
A  loss  and  gain  statement  can  not  be  made  out.  .A.  financial  statement  can  be  made.  The  single  entry 
statement  sets  forth  the  assets  and  liabilities  of  the  business.  The  assets  are  listed  and  added.  Beneath 
these  the  liabilities  are  listed  and  added.  The  difference  between  the  total  assets  and  the  total  liabilities 
is  the  net  capital  or  present  worth  of  the  business.  If  the  net  capital  at  some  previous  time  be  known, 
the  gain  or  loss  of  the  business  since  that  time  can  be  determined  by  comparing  the  net  capital  today  with 
what  it  was  at  that  time. 


166 


APPENDIX 


Mr.  Nissen  asks  you  to  prepare  a  single  entry  statement  as  of  October  15  He  tells  you  that  the  cash 
in  the  bank  is  $500.00.  You  know  how  much  money  there  is  in  the  cash  register.  Mr.  Nissen  values 
his  stock  of  groceries  on  hand  at  $5817.36,  his  horse  and  wagon  at  $270.00,  and  the  furniture  and  fixtures 
in  the  store  at  $450.00.  The  balances  of  all  accounts  receivable  and  payable  can  be  determined  from 
the  ledger.     Prepare  a  statement  in  the  following  formr 

F.  P.  Nissen's  Single  Entry  Statement,  October  15,  19 — 
Assets 

Cash  in  bank  $500.00 

Cash  in  cash  register  ** .  ** 

Stock  of  groceries  on  hand  valued  at  5817.36 

Horse  and  wagon  valued  at  270.00 

Furniture  and  fixtures  valued  at  450.00 

Mrs.  Wm.  Conant,  110  S.  East  Ave.  **.** 

Mrs.  Chas.  P.  French,  157  S.  East  Ave.  **.** 

Total  Assets 

Liabilities 
National  Biscuit  Co.,  110  N.  Morgan  St.,  Chicago 
The  American  Cereal  Co.,  9  Jackson  Blvd.,  Chicago 

Total  Liabilities 

Net  capital  or  present  worth 
Assets  October  1  j****  ** 

Liabilities  October  1  ***** 


$**** 

*♦ 

$+*  ** 

**  ** 

*** 

** 

J**** 

** 

**** 

** 

«** 

** 

Net  Capital  October  1 
Net  gain 

In  order  that  the  proprietor's  account  in  the  ledger  shall  show  what  he  is  worth  at  all  times  it  will 
be  necessary  to  credit  him  with  the  amount  of  the  net  gain  as  shown  by  the  foregoing  statement.  There- 
fore you  will  make  a  day  book  entry  crediting  the  proprietor  for  the  amount  of  his  net  gain.  Post  this 
immediately  to  the  account  of  the  proprietor  in  the  ledger  and  close  the  account  with  a  balance  as  of 
October  15. 

Changing  from  Single  Entry  to  Double  Entry 

The  process  is  very  simple.  Open  a  douljle  entry  joiu-nal  and  let  your  first  entry  be  a  journal  entry 
crediting  the  proprietor  for  his  total  assets  and  debiting  each  one  of  the  items  listed  in  the  statement  as 
assets.  This  will  necessitate  opening  accounts  with  Merchandise,  Horse  and  Wagon  and  Furniture  and 
Fixtures.  Make  another  journal  entry  debiting  the  proprietor  for  the  total  of  his  liabilities  and  crediting 
the  accounts  of  the  different  creditor  firms.  Next  open  a  double  entry  ledger  and  post  the  two  journal 
entries.  It  will  be  observed  that  your  double  entry  ledger  balances  will  correspond  in  detail  with  the 
single  entry  ledger  balances  except  that  in  the  double  entry  ledger  there  will  be  added  accounts  with  Mer- 
chandise, Horse  and  Wagon  and  Furniture  and  Fixtures.  Take  loose  sheets  of  journal  and  ledger  paper. 
Make  the  journal  entries  necessary  to  change  F.  P.  Nissen's  books  from  single  to  double  entry  on  Oct. 
15.     Post.     Take  a  trial  balance. 

In  order  to  see  even  more  clearly  how  single  and  double  entry  compare,  rewTite  F.  P.  Nissen's  business 
in  double  entry  form,  proceeding  as  follows:  (1)  Journalize  all  entries  appearmg  in  the  single  entry  day 
book  except  the  last.  It  will  not  be  necessary  to  perform  the  computations  again,  and  explanatory  matter 
may  be  omitted.  (2)  Journalize  all  entries  appearing  in  the  single  entry  cash  book  except  the  first,  third, 
and  eighth  entries,  which  you  have  already  journalized,  as  they  appear  in  both  day  book  and  cash  book. 
(3)  Post  all  journal  entries  to  regular  double  entry  ledger  sheets  (center  ruled).  (4)  Take  a  trial  balance. 
(5)  Make  statements,  using  the  inventories  of  Oct.  15  as  given  at  the  end  of  the  single  entry  set.  (6)  Close 
the  double  entry  ledger.  (7)  Now  compare  the  double  entry  statement  with  the  single  entry  statement. 
The  single  entry  ledger  should  agree  with  the  double  entry  ledger  as  far  as  it  goes.  Accounts  of  what 
class  do  not  appear  in  the  single  entry  ledger?    Name  them  in  detail. 


VARIABLE  PRICE  LISTS 

Students  may  all  use  the  same  price  lists,  or  ilifTeient  jirico  lists  may  be  assigned  to  each  student. 
Fifty  different  sets  of  results  can  be  secured.  List  No.  1  is  given  in  the  text.  List  No.  2  consists  of  buy- 
ing price  list  A  and  selling  price  list  A.  List  No.  3  consists  of  buying  [jrice  list  A  and  selling  price  list  B, 
and  so  on,  all  as  shown  by  the  following  table: 


LIST 

BUYING 
PRICE 

SELLING 
PRICE 

LIST 

BUYING 
PRICE 

SELLING 
PRICE 

LIST 

BUYING 
PRICE 

SELLING 
PRICE 

LIST 

BUYING 
PRICE 

SELLING 
PRICE 

No.    2 

A 

A 

No.  15 

B 

G 

No.  27 

D 

E 

No.  39 

F 

c 

No.    3 

A 

B 

No.  16 

c 

A 

No.  28 

D 

F 

No.  40 

F 

D 

No.    4 

A 

C 

No.  17 

C 

B 

No.  29 

D 

G 

No.  41 

F 

E 

No.    5 

A 

D 

No.  IS 

C 

C 

No.  30 

E 

A 

No.  42 

F 

F 

No.    6 

A 

E 

No.  19 

C 

D 

No.  31 

E 

B 

No.  43 

F 

G 

No.    7 

A 

F 

No.  20 

C 

E 

No.  32 

E 

C 

No.  44 

G 

A 

No.    8 

A 

G 

No.  21 

c 

F 

No.  33 

E 

D 

No.  45 

G 

B 

No.    9 

B 

A 

No.  22 

c 

G 

No.  34 

E 

E 

No.  46 

G 

C 

No.  10 

B 

B 

No.  23 

D 

A 

No.  35 

E 

F 

No.  47 

G 

D 

No.  U 

B 

C 

No.  24 

D 

B 

No.  36 

E 

G 

No.  48 

G 

E 

No.  12 

B 

D 

No.  25 

D 

C 

No.  37 

F 

A 

No.  49 

G 

F 

No.  13 

B 

E 

No.  26 

D 

D 

No.  38 

F 

B 

No.  50 

G 

G 

No.  14 

B 

F 

Set  Two 


ARTICLE 

BUYING 

PRICE   LISTS 

SELLING   PRICE   LISTS 

A 

B 

C 

D 

E 

F 

G 

A 

B 

C    1    D 

E 

F 

G 

Orange  Pekoe  Ceylon  tea,  lb. 

.51 

.52 

.53 

.54 

.55 

.56 

.57 

.81 

.82 

.83 

.84 

.85 

.86 

.87 

India  curry  powder,  bot. 

.11 

.12 

.13 

.10 

.11 

.12 

.13 

.17 

.16 

.15 

.18 

.17 

.16 

.15 

Penang  cloves,  lb. 

.37 

.38 

.39 
.64 

.40 
.65 

.37 
.64 

.38 

.39 

.62 

.61 

.60 

.59 
1.20 

.58 
1.05 

.57 

.56 

Young  Hyson  tea,  lb. 

.62 

.63 

.63 

.62 

1.05 

1.10 

1.15 

1.06 

1.07 

Arabian  Mocha  coffee,  lb. 

.17 

.18 

.19 

.20 

.19 

.18 

.17 

.28 

.29 

.30 

.28 

.29 

.30 

.29 

Cinnamon,  lb. 

.41 

.42 

.40 

.39 

..38 

.37 

.36 

.67 

.66 

.65 

.64 

.63 

.62 

.61 

Arm  and  Hammer  soda,  pkg. 

.05 

.06 

.05 

.06 

.05 

.06 

.05 

.07 

.08 
.19 

.07 

.08 
.18 
.15 
.75 

.07 

.08 

.07 

Finest  Santos  coffee,  lb. 

.14 

.16 

.15 

.14 

.13 

.16 

.15 

.18 

.20 

.19 
.14 

.18 

.20 

Royal  Dutch  mustard,  can 

.06 

.07 

.08 

.06 

.07 

.08 

.07 

.12 

.13 

.76 

.14 

.79 

.13 

.12 

Van  Houten's  cocoa,  tin 

..50 

.51 

.52 

.53 

.54 

.55 

.54 

.74 

.78 

.80 

.77 

Set  Three 

No.  527  I'lamUrs  arm  chair 

4.00 

4.05 

4.10 

4.15 

4.20 

4.25 

4.15 

6.00 

6.05 

6.10 

6.15 

6.20 

6.25 

6.30 

16. 

24. 

17. 
25. 

18. 

16. 

10. 

24. 

17. 
25. 

18. 

17. 

~16. 

No.  1625  library  tables,  mhgy 

18. 

16. 

17. 

18. 

19. 

26. 

27. 

26. 

No.  2787  Cir.  wal.  d  room  set 

105. 

106. 

107. 

108. 

109. 

110. 

111. 

160. 

161. 

162. 

163. 

164. 

165. 

166. 

No.  600  leather  settees 

15. 
10. 

16. 

17. 
12. 

18. 
9. 

19. 
10. 

20. 
11. 

17. 
12. 

22. 

23. 
18. 

24. 

25. 

20. 

24. 
16. 

27. 

26. 

No.  336  writing  tables,  mhgy 

11. 

17. 

19. 

15. 

17. 

Set  Four 

Youths'  pat.  leather  bluchers 

1.75 

1.70 

1.75 

1.80]  1.85 

1.75 

1.70 

2.45 

2..50 

2.55 

2.60 

2.65 

2.70 

2.75 

Boys'  kid  bluchers 

.85 
.90 

.86 
.92 

.87 

.88 

.89 

.98 

1.06 

.91 

.92 

1.40 
1.45 
1..55 

1.45 

1.50 

1.45 
1.45 

1..5S 

1.40 

1.45 

1.45 

Boys'  gum  overshoes 

.94 

.96 

.97 
1.04 

.99 

1.30 

1.40 
1.57 

1.50 
1.59 

1.45 

1.40 

Men's  oil  grain  No-Seam  bals. 

1.00 
2.05 

1.05 
2.10 

1.10 

1.08 

1.02 

1.56 

1.60 

1.55 

Men's  gun  metal  bluchers 

2.15 

2.10 

2.05 

2.00 

2.10 

2.75 

2.80 

2.85 

2.90 

2.85 

2.80 

2.90 

Wos.  Maxine  button  shoes 

2.06 

2.07 

2.08 

2.09 

2.10 

2.11 

2.12 

3.05 

3.10 

3.15 

3.20 

3.25 

3.30 

3.35 

Ladies'  Dongola  C  S  bals. 

.94 

.95 

.96 

.97 

.98 

.99 

1.00 

1.61 

1.62 

1.63 

1.64 

1.65 

1.66 

1.67 

Men's  Kang.  grain  Ripless 

1.10 

1.15 

1.20 

1.10 

1.15 

1.20 

1.15 

1.90 

1.88 

1.87 

1.86 

1.85 

1.80 

1.75 

Men's  Am.  rubbers  Quaker 

.55 

.50 

.45 

.50 

.55 

.60 

.55 

.95 

.90 

1.00 

.95 

1.00 
.60 

.95 
.65 

.90 

Boys'  Para  rubbers 

.35 

.36 

.37 

.38 

.39 

.40 

.41 

.60 

.65 

.70 

.75 

.70 

Men's  King  George  oxfords 

2.50 

2.55 

2.60 

2.65 

2.50 

2.55 

2.60 

3.20 

3.15 

3.05 

3.00 

3.10 

3.15 

3.20 

Men's  Boston  Bluchers 

1.00 

1.05 

1.10 

1.15 

1.05 

1.10 

1.05 

1.50 

1.40 

1.60 

1.45 

1.50 

1.55 

1.60 

167 


INDEX 


Acceptance 112 

Accounts 5-15 

Accounts,  deferred 42 

Accounts  with  persons 33-35 

.Analyzing  an  account 123 

Appendix 144-167 

Auxiliary  books,  defined 42 

Balance  of  balances 68 

Bank  account 81 

Bank  draft 113 

Bond  account 131 

Bookkeeping,  defined 41 

Books  of  original  entry,  defined 42 

Canceling  entries 109 

Cash  account 5-8 

Cash  book,  debit  side 93-94 

Cash  book,  credit  side 95-98 

Cash  book,  complete  form 100-101 

Cash  book,  six  column 127-129 

Changing  from  single  to  double  entry 166 

Cash  discount  account 131 

Cash  discount,  how  posted 132 

Check,  form  of 75 

Checking  the  trial  balance 52 

Classification  of  accounts 61-69 

Closing  one  account  into  another 62-64 

Closing  the  ledger 65-69 

Closing  the  ledger  through  journal  entries 125 

Closing  out  the  business 121 

Collection,  draft  for 113 

Debit  and  credit,  equality  of 45^6 

Debiting  and  crediting,  rule  for 14 

Debiting  and  crediting,  general  rule  for 44 

Definitions  and  principles 41-44 

Discount,  three  kinds 122 

Double  entry  bookkeeping,  defined 44 

Drafts 111-115 

Endorsement 22 

Estate,  accounts  of  an 131 

Expense  account 36-37 

Explanations  in  the  ledger 99 

Financial  statement 55-57 

Financial  statement,  balanced  form 146-147 

Financial  statement,  how  to  read 148 

Forwarding  an  account 77-78 

Forwarding  the  cash  book  footings 119 

Forwarding  the  sales  book  total 108 

Income  account 131 

In-Freight  account 103 

Insurance  account 131 

Interest  account 30-32 

Interest  and  discount 85 

Inventory 11,  79 

Invoices 40 


Journal,  defined 44 

Journal,  models 17,  29,  37 

Journalizing ^ 16^4 

Ledger,  defined 42 

Ledger,  loose  leaf 122 

Ledger,  special  ruled 122 

Loss  and  gain  account 67 

Loss  and  gain  statement 57-59,  110 

Loss  and  gain  statement,  sectional  form.  .  .144-145 

Merchandise  account 9-13 

Merchandise  account  subdivided 140-143 

Model  set 47-69 

Money,  defined 41 

Notes  payable  account 25-26 

Notes,  promissory 5-6 

Notes  receivable  account 22-24,  111 

Notes  payable  book 116-117 

Notes  receivable  book  116-117 

Original  entry,  books  of,  defined 42 

Partnership 102 

Personal  accounts 33-35 

Posting 47^8 

Preface 3 

Preliminary  problems 4 

Problems  of  bookkeeping,  the 73,  59-62 

Proof 62 

Promissory  notes 5-6 

Proprietor's  account 35 

Purchases  account 140 

Purchase  book 129 

Real  estate  account 18 

Returned  goods,  how  treated 135 

Returned  goods  accounts 142-143 

Review  and  rules  for  journalizing 41-44 

Sales  account 140 

Sales  book 90-92 

Set  four 127-140 

Set  three 103-121 

Set  two 74-85 

Single  entry  set 150-166 

Statements 55-73 

Statements,  monthly 89 

Statements,  two  page  forms 144-148 

Stock  record 104 

Subordinate  expense  accounts 63-142 

Test  in  closing.  No.  1 89 

Test  in  closing.  No.  2 121 

Test  in  closing.  No.  3 142 

Trial  balance 49,  52 


Value,  defined .     41 

Variable  price  lists 167 


168 


